Try calling it a "filtered" list. As in posts from everyone on this list get filtered from the main feed, + only get seen when you look at this list.
1. As in your design, this property gets toggled on a per-list basis.
2. A given account could still be included on multiple lists (regardless of this setting).A
3. BONUS UX: Any per-user Block/Mute affordances get a prepopulated "Filter to..." action to choose a filtered list to join.
@pevohr @d3cline I don't love that name because filtering is already a thing in Mastodon and it is known as a thing that gets rid of content rather than putting it somewhere else