These are honest questions and it seems way too fuzzy to me to be making moral judgments about the whole mess.
I think one does have the right to block ads on one’s machine if one chooses.
However, personally, because of the “if ad blocking was universalized, the services I appreciate would likely not exist” reasoning, I choose not to block ads.
As for other things like “muting/covering ads on screen”, yeah, that does seem a bit fuzzy. Sometimes I’ll even use a browser extension to fast forward an ad somewhat.
I do think this is something for the individual to decide how they will deal with ads. When I mute an ad, I don’t think I’m really free riding? For one thing, I don’t think it is contrary to the expectations of those being sold the ad slot. Me fast forwarding the ads a bit probably is contrary to their expectations, so I don’t have as good justification for it, but I don’t feel like I’m cheating when I do it. (Or, if I do, it is because the particular ad is objectionable enough that I’m willing to stick it to the advertiser)
It's the same mistake libertarians make when they assume a fully informed and rational society.
How how-well-things-work depends on the number of people doing a thing, varies from thing to thing. For some things, as long as one or more people behave in a particular way, a thing goes well. For other things, if even one person does a particular thing, things go badly. And there are plenty of situations in between.
These different situations call for different responses, I think.
It's not a way to model reality, terrible or otherwise. That’s not what it purports to do.
If their copyright monitoring algorithm recognises the tracks being performed and the licence holders have opted to receive a share of ad revenue rather than issue a takedown notice, then I think the answer might well be yes.