The instance seems to be mostly right wing trolls. I know defederating is unpopular but I don't think much is to be lost in this case and it can save the mods some headaches.
Edit: the response on exploding-heads.com to my reporting of transphobia. Courtesy of the "second in command"
I'm pretty sure it wasn't meant to be better, just different. While I'm never going back to reddit, if the one who owns the server makes a choice on the content of their server, I can decide whether or not I agree and stay or move. THAT is what's good about this system. You can stick to the instance that follows your ideology.
Okay, then move if you don't enjoy the instances available. Personally I'd like to see the blocked instances on a user-level instead of a mod-level.
That functionality doesn't exist yet as far as I know so the best bet is to ask the instance you're on "Would we defederate over this" and if the answer is no, change instances