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Google Chrome’s plan to limit ad blocking extensions kicks off next week
(arstechnica.com)
This is a most excellent place for technology news and articles.
What you're describing is not a man-in-the-middle proxy, but a simple DNS block. That's a very crude approach to blocking ads and notoriously doesn't work for YouTube and Google ads because they're served from the same domain.
I run a pihole myself but there's still a huge difference between browsing with pihole only and pihole+ublock. It's certainly not the answer to the Manifest V3 shenanigans.
however its relatively rare that an ad company provides a bunch of services I want to use. The only exception i can think of is google.
obvs its hard to avoid gmaps because the alternatives are beyond godawful (no, openstreetmaps, i didn't want to go to the coffee shop of the same name in connecticut, I wanted to go to the one 3 km away), but for youtube I use a python tool called youtube-local which is very very effective, strong rec. Im sure google will defeat them eventually, but so far all of the incremental "block a little of this, block a little of that" stuff the g-man has been doing has been bypassed within a few days. Viewtube is also pretty easy to self-host, but they never quite figured out how to make the UI work.