I think the current technical limitations push us toward this archipelago model.
The thing is, bigotry and racism, to name only two, will exist on any social media, any platform where anyone is free to post something. And since those are societal issue, I don’t think it is up to the fediverse to solve. Not all by itself by any means.
What the fediverse can solve however, is to allow instances to protect themselves and their members from such phenomenon. And my limited understanding, as a simple user, is that’s it’s not possible right now. Not on lemmy nor on Mastodon, if I trust the recent communications around moderation and instance blocking. Not without resorting to allow list.
This is annoying to admit because it goes against the spirit of the fediverse. But the archipelago model is the only sane solution short term IMO. And it will stay that way until the moderation tools make a leap and allow some way to share the load between instances and even between users.