It should block communication and the LFR/LFD systems will avoid grouping you with anyone you have ignored. That does not work for group finder since that is just a tool to help you find a group, not something put together by our system.
They will still be in the world, you may not be able to see their chat or otherwise interact with them, but they don’t disappear from the same areas you can go to.
No, and likely I’m afraid Customer Support isn’t privy to what design considerations may be discussed. Since an option is in place that does the same thing, though requires you to manually ignore the character on other characters you wish to also ignore them on.
If you’d like to see it function differently I’d recommend using the Submit a Suggestion option located in the help menu so our Devs can see it.