[...] There are also instances with varying levels of moderation, which may be encompassed in this.
I know you didn't really touch on what the moderation aspect might involve (and maybe you have provisions for this in a section I skimmed), but ideally I would want defederation lists to be included somehow, at least as an advanced option. Does the user want/not want an instance federated with [other instance]? And then, before final instance selection, present the full list just for verification.