Hi, I'd dispute what Chris says.
I just got a crack to run two msn clients at the same time, and logged in with different accounts - A and B.
Results:
When B blocked A, account A could no longer see B's display picture in the list of contacts / network. Instead, B's display picture was changed to the default grey msn box.
This happened every single time, with both accounts, so I would conclude that when a user is blocked, not only can they not see the blockee's online status, but the display picture is also blocked.
If this is the case, it's a huge oversight because I don't think it's right that a user should be able to tell when they're blocked....but I really believe that you can...which is sad in a way because I was pretty gutted that this person chose not to talk to me anymore
( But hey...