It’s natural to want to find a community an individual aligns with. Because instances are curated, it is my assumption that users engage more than an alternative like nostr for example.

Personally, I struggle trying to curate my feed with stuff I’m actually interested with nostr. In Lemmy a user starts with a small world and expands, it is the opposite with nostr even though technically a user could find a curated relay but this isn’t very intuitive.

What’s stopping a Lemmy instance from federating with two instances that don’t federate with each other?

Blocking Meta has more to do with not playing nice in the first place. The concern is expansion of feature sets making other Lemmy instances/clients irrelevant the way google chat did with XMPP. Google put in features not compatible with XMPP clients, while it brought a lot of users on the protocol, eventually everyone just moved to google clients. Not so much about privacy. If something is public, it is reachable.

That said, IMO the only way for that to work is if a great majority of instances block them.