They've failed in their own example. gmali.com has valid MX records and accepts mail. Just because they don't accept billions of email per month, why should this service block any mail?
When I enter fred@gmal.com, I get a 'Did you mean' message, with the red cross error icon.
I presume this means that it's detecting that gmali.com is a valid domain and can receive e-mail, but for most people it's not what they actually meant, whereas gmal.com is both a probable typo and a domain that cannot receive e-mail, and therefore invalid.
In other words, I think it's doing the right thing, in that it's detecting that fred@gmali.com is a valid address, but warning you that it's not the correct one. I think there is definitely a usability improvement though, as it's easy to miss the yellow warning icon, and assume that it's actually telling you that you can't use that address.