Wasabi specifically states that blacklisted UTXOs will not be allowed in the CoinJoin service. A topic of much contention here.
That's not a restriction on the Wasabi software, that's a ToS for a specific service. I don't blacklist any UTXOs from my coordinator.
This works as long as the users do not send those funds to questionable services where they can be traced again.
It's a cycle, not a decreasing line graph.
It doesn't matter where you send a coinjoined output, the recipient can't determine which coinjoin inputs were used to create it.