I've been successfully reporting troll-accounts and got them banned, I've blocked entire communities (mostly some niche-nsfw communities, so they don't turn up in my local feed on my lemmynsfw.com-account). And I've found most community-moderators reeeeeeaaaaally don't like fascists on their turf and if you see something and report something, most will get the boot.

This meme presents a false choice, defederation is not the only sane reason to choose (because understanding and/or engaging nazis is decidedly not sane).

Once an entire instance is gone though... defederate like there's no tomorrow.