You may want to read the actual article which explains how replies very much end up on their instance and therefore require moderation. They will 100% host all replies + all media attached to it. That's how federation works.
Yes, defederation is per instance but cuts of all users of that instance from BBC. Here's a fresh example:
https://social.anoxinon.de/@Curator@mastodon.art/11080988949...
Pretty large instance that defederated before BBC even started.