As it is, the mute feature is rather underdeveloped in my opinion. There are a LOT of ways around it and a LOT of things it's just not useful for. Here are some examples:
-Avatar A has an annoying sound emitter playing.
-Avatar B doesn't like the sound emitter.
-Avatar B can do nothing. Sounds are not mutable. Also, if it's the sound and nothing else that bothers Avatar B, even if muting would block sound, it would also block the emitter's chat and other genuinely important communications.
-Avatar A is wearing a million billion sculpties.
-Avatar B is lagged below 1FPS.
-Avatar B is helpless and has to pray that Avatar A leaves, or Avatar B has to leave themselves. An abuse report would take far too long, and there's no way to prevent an avatar's attachments from rezzing.
-Avatar A is shouting needlessly.
-Avatar B doesn't want to hear Avatar A in chat, but would like to leave IM open in case Avatar A apologizes later.
-Avatar B must either mute everything or nothing.
My proposed solution: Replace Mute as we know it with a more flexible tool. For example; in your Friends list, you get options, like this:
-Can see my online status?
-Can locate me at will?
-Can modify my objects?
Give Mute similar flexibility through checkboxes.
-Mute sounds?
-Mute chat?
-Mute IM?
-Mute voice? (I know this is already doable, but it should be centralized.)
-Mute/discard inventory offers?
-Don't rez avatar (or rez as Ruth)?
-Mute avatar's object sounds?
-Mute avatar's object chat?
-Mute avatar's object dialogs?
I've seen griefers continue to harrass people that have muted them easily; the methods are known. Make Mute flexible and ensure that we won't have to put up with the hassles of the current all-or-nothing Mute system.