From the release notes for 1.28:
Latif Khalifa on May 19, 2011 at 20:57
Hm, I guess that’s an oversight. Inventory offers, local chat, etc. is blocked but not those people in group chat. I knew i missed something
Issue still exists in 2.16.1418
1.) Mute/block a user.
2.) Wait for user to talk in a mutually shared group.
3.) User's chat visible.