The moderation tools on Hubski are psychologically weird. For the longest time, we've relied on third parties like moderators and curators to give us guidance on what's good and what's bad. The benefit from this system, besides cleaner content feeds, is a peace of mind that comes from less control. When something "bad" gets through, you're able to blame the third party. If something "good" doesn't get through, you're able to blame the third party. At Hubski you're that moderator and what's so weird about this, for me and few others I've seen, is that the scary part of being your own moderator isn't accidentally letting the bad through, but accidentally filtering the good out. There's a dozen little psychological oddities like that one attached to this, and frankly any, new system. Some of those oddities may affect, some some may not, and because of that I don't believe there's any one answer, one set of etiquette guidelines, that should be laid out for everyone. You're allowed to do whatever you want with your moderation powers but remember this is a community that aims towards person to person connection. That's your primary tool here. If you don't agree with them or they don't agree with you, you can try to talk as two flesh and blood human beings, and if that doesn't work (or you don't feel like it) you can use the other tools at your disposal.
That's how I feel about it. I just blocked this person who muted me because I don't want posts that I can't reply to showing up in my feed. I did unblock them from PMing me, though, just in case they decide later that it was a mistake and want to rectify the situation. Other than that I haven't even hushed anyone yet!