Servers stopping federation with each other is pretty normal IMO. If I had a mastodon server I would also not federate with something like gab.com.
However all the LGBT+ friendly servers federate with each other and that's good enough for me. I like not having to see toxicity, there's too much of it in the world already.
In the Mastodon ecosystem it seems to be often taken to the extreme. As in, there ar servers will not federate with anyone who doesn't share their blocklist, and servers will block anyone using Pleroma (because it's "fascist") etc.
I've only seen that with certain German instances. They have their own particular laws over there and they're very adamant that other countries follow them to the letter, yes. I've seen the discussion. When it comes to nazi imagery I agree that should be forbidden everywhere but I think there were some other stipulations that were more controversial.
But I have not seen that outside the scope of Germany.
I don't know pleroma though. I've always hated twitter for its short-form content (I feel like it stimulates stupid nonsense like "look at my run today" and "I just had dinner" and discourages actual interesting content. So I was never into twitter clones either. I do use lemmy more although it has its own specific attitude issues around its developers (tankies).
Pleroma is Mastodon server software. For a bunch of essentially random reasons, it was popular among right-wingers setting up their Mastodon instances, and some servers responded by blocking any Mastodon server running it outright. A subset of those would also block any server not blocking Pleroma like they do.
However all the LGBT+ friendly servers federate with each other and that's good enough for me. I like not having to see toxicity, there's too much of it in the world already.