would rather start with an entirely open instance and block what I don't want to see myself

The thing is, federation is a bit... "weird"?

I mean, a federated instance... doesn't do any federation by default, it just sits there... until "some user" on the instance decides to subscribe to a community on a federated instance... at which point the instance both starts receiving posts from that community, and starts showing them in the All feed.

So the All of an instance, is an aggregated "everything someone on the instance has subscribed to"... which is somewhat of a nonsense: why should an instance owner let decide random users what the instance shows in its public feed?

That means instance owners have to curate which instances do they allow their users to pull into their instance's All... and thus, defederation.

But even if there was a separate "public All" and a "members only All"... and even if people could filter out stuff from the "members only All" feed of their instance... the instance would still be pulling the content from other instances. That means bandwidth, CPU, RAM, and storage... for stuff that maybe just a single user of the instance is interested in. It makes little sense.

Things get much worse, when a ton of users from a large instance, with a completely different mentality, start commenting on random communities from other instances in their instance's All feed, just because maybe a single user subscribed to it back at some point, without taking the time to get to know the rules of the target instance (maybe they'll read the community's sidebar, maybe they won't).

At the very least, there should be a prominent warning about "YOU ARE COMMENTING ON ANOTHER INSTANCE, here are its rules". At the most extreme, breaking the rules of another instance should have consequences at your home one.

Then, and only then, maybe, a large instance with a lot of resources, could pull content from a ton of other instances, and each user could just filter the All feed however they wanted.

But that seems unrealistic, and would lead to centralization, which is the opposite of what the whole concept of federation is about.

I think the current state could be improved, but having the Fediverse split into groups of like-minded instances that gravitate towards each other, is not a bad thing.

Discoverability could be improved, by having tools that show more clearly which instances "belong together", so users could pick any instance of the group to access to all others. Then each user could filter out the instances "from the group", at least at the app level, but maybe also directly at the server to reduce bandwidth usage... and use an app to maybe aggregate communities across groups if they wish.

Identity management is a separate point: maybe you want to participate in different instance groups with the same identity, maybe have a different one, or even more than one, per like-minded group. Maybe you want to be a furry programmer, but an anonymous porn watcher, a tinkerer with a real face, and a clown in a pointy hat shitposter.

All of those should be allowed, and even have features to make it easier to not "double dip" (I think Sync may be going in that direction).