NO

I don't think the features should be merged. Hiding from seeing (muting) is not the same as wanting to hide from replies on a blog (moderating).

I think people being able to moderate their own blog (the latter feature) is okay as long as there is a prominent label indicating that poster moderation is active. And it might be debatable whether this should even be allowed on posts which aren't reward-declined, because if they aren't then it isn't really a 'private' personally-owned blog post but one which has chosen to participate in the shared reward pool.

Also consider how this will work with communities, which probably should be able to have their own rules on what sort of moderation is allowed or required for that particular community.