Hopefully someone else can elaborate more, but just to start you can only progress the battle pass with a seasonal character, not the eternal ones. Seasons also have new loot drops. I'm also new, so I unfortunately don't know much more.

For most instances the default stance is to federate everything, and defederate as last resort. Defederatipon isn't used just because you disagree with someone's taste in memes. It's used to isolate servers that are doing something you consider unhealthy for your community. A common example is unmoderated hate speech. It's better to defederate the problem server than to expose your own users and risk an exodus. And then if/when the instance fixes the problem that caused the defederation, you can refederate them.