I've raised this with the other admins to discuss our federation status with that instance. Having had a look around, I'll be advocating for defederation. If the instance admin turns things around then we can always refederate later on. Personally, I don't want to see alt-right posts, it's depressing and counterproductive to engage with them. Let them scream into the wind where nobody can hear them.

Updated: We are now defederated with that instance. I'll be happy to revisit the decision if their admin cleans it up.