Okay so the reason matchmaking can't discriminate against people you've muted...
...is that it would be a problem for the queue health in high Elo. So what? There's an obvious workaround for that problem: implement in low Elo only.
When the cost is "nothing but the development time to write the code" and the benefit is "improved matchmaking for the 98% of players below Diamond", the choice is obvious. Implement it. "But this would be a problem in high Elo" is not a valid excuse to not implement it anywhere.