I've never been blocked, so I might be wrong there. But the last word problem was the main reason I've seen people hate the move to the current blocking system, so I assumed it didn't exist before.
Yes, it's very annoying when the person you're harassing stops you from harassing them, I'm sure. You have all the steam of somebody being wrong on the internet and it just ends, without you being able to vent over four more days as you go back and forth pestering each other with thousand-word comments nobody will read. Trolls must hate it when they get cut off from that.
Reddit's official announcement for the new system does explicitly mention they're changing it so you can't interact with users that blocked you anymore. Which implies you could before.
The comments are all complaining about how blocking people doesn't block them, explicitly complaining that this change doesn't do the thing that blocking is, which is not to mute, but to block.
Looking through the history of changes, it seems you're referencing this:
And the comment section there is much more mixed, although I do see more people complaining. I suppose people complain to reddit announcements no matter what, but to be fair, they are almost always bad.