> it hides all posts bob made in response to alice posts
Exactly, it hides these from anyone else who might read the thread, including others participating in the thread.
This offers Alice not just the means to control her own Bluesky experience, but also to unilaterally control which parts of the conversation that all others on Bluesky can see.
It is in effect a feature to selectively delete the posts of others for any reason.
> because bob is a deranged lunatic and alice does not owe bob the attention he seeks
That is generally not the reason why users on Bluesky hit the block button. There's a strong tendency there of blocking because someone disagrees with you, or they explained why you're wrong about something, or they pointed out that you're spreading misinformation.
On Bluesky, blocking is a way to quickly and conveniently hide any dissent.