Agreed, the point to ignore is not to see a particular user. It is actually a function that people have to account for in order to avoid conflicts. It does not make much sense to have people in the ignore list in the last few threads, but it's a MyBB bug.
All that would have to happen is again a small query adjustment to exclude threads when the last post from a user is in the ignore list. The problem is, though, that it's actually a bit more resource-intensive because a user's ignore list is in a separate table. It would not be too crazy, but would cause new posts to load slightly slower due to the amount of analysis that is already taking place.