That's one way to implement blocking, but their not really being blocked from the lobby, just from you being able to see them. This is not what I meant.
What I meant was for Sport Mode to filter out people from the actual lobby itself if they are on your PSN Block list. For arguments sake, if 100 clean races & 10 dirty racers are are entering at the same time for a race, & if those 10 dirty racers were on the PSN Block list of 50 of the clean drivers, the game would match the 50 clean drivers with each other & match the 10 dirty drivers with the other 50 clean drivers who didn't have them on their list. That way, you would only end up being matched with players who are not on your blocked lists. The more time that goes by, & the more bad drivers got blocked, the more lonely their races would become as most clean drivers wouldn't want to race them anymore. Then, clean drivers would find themselves getting matched more & more with other clean drivers.