Finally someone who has a clue. That was well written and easy to understand. Thank you for all the work you put into that post!
Defederation is about what an instance allows in, not what an instance allows out. Defederation stops you seeing the defederated instance's content, but it does not stop them seeing your instance's content.
As a final, tiny little point of interest - there is a setting called AUTHORIZED_FETCH (Secure mode) which will force the requesting instance to authenticate. This can be used to stop the data from flowing out.
Of course enabling this is somewhat problematic as it tends to break other things. But it's there.
wagesj45
herriott101