The question is: illegal content WHERE?

e.g.  It is illegal to publish stolen national security information in the US (e.g. James Rosen as "abetting a leaker" or Snowden).  Is it illegal in the blockchain?

It is illegal to publish an image of Muhammad in some places, legal in others.  Is it illegal in the blockchain?

Marriages may be made as children and consummated at 9 or 10 in some places, but that is illegal other places.  Would that be considered child porn if images were published even if it is legal somewhere to do with your wife?

The real question is, who decides what is illegal and what is not?  Where is this illegality?  A town of 50 might prohibit something.  Or a town of 50,000, a city of 5 million? A country of 20 million?   What is the cutoff?  Who decides?

The blockchain is just data.  I could look at a block or sequence of blocks and publish an algorithm to decode those blocks into pretty much anything offensive to someone, somewhere or has enough power in some jurisdiction to make it illegal.   E.g. take bytes 1 through 50000, and apply this code.  You could even write a routine that would say, "I want this as the result, given this input, create an overlay algorithm to create it".  It would not be difficult.

Blacklisting is a bad idea to start with, but blacklisting to serve some unknown political masters from every potential jurisdiction in the world opens up a huge can of worms.  This would create some non-bitcoin alt-coin as I can't imagine would fly as "bitcoin".

:-)