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Steam should invest some of their millions of dollars back into the site and improve it. It's beyond arcahic design.
This is restricted to how people implement their games into Steam.
You will find that Valve do this on some games. Block someone in L4D2 for example and you won't join their games and they can't join yours. If the game is made so it knows which server you are playing in and reports this to Steam then it's doable.
If the game doesn't report back to Steam this information, then all Steam knows is that you are "in-game". It doesn't know if you are in multiplayer, or which server you are in! Likewise it doesn't know the same about the person you blocked so it can't do anything about it. Additionally, this would only work with the "join this game" link from Steam if Steam didn't tell the game server who your blocked users are so they know to stop you connecting.