"Decline in overall quality" is a subjective metric, though. Does defederation reduce participation? Certainly.
But ya know, there's a reason people defederate certain instances -- usually because those instances have attracted people who are disruptive to discussion on other instances.
It's really been no problem at all for me to keep a foot in lemmy.world, kbin.social, lemmy.ml, and beehaw.org. And a few other instances that appeal to more niche audiences.
And if I really feel like discussion on an instance is offering something and I'm missing out, I can always get an account there.
Not that I'm arguing against better moderation tools, of course. By all means, lemmy devs should prioritize those as soon as scaling/stability issues are dealt with.