Auto/allo come from the ancient Greek words for self/other. It’s one of those pairs like cis/trans, hypo/hyper, in/ex, etc.

what action can it enforce beyond banning or blocking?

Defederation, that’s one of the key concepts of the fediverse

From what I see, that specific post was only because it sounded like lemmynsfw would allow loli. For me the biggest issue is that the porn would occasionally flood my front page because of that one bug (that got fixed), I really don’t want to see porn when I’m just browsing (but I have nothing against it existing on Lemmy).

For me what makes something porn would be the intent: is it made/shared for sexual arousal. Something can be porn without any nudity, and you can have any amount of nudity without it being porn.