As trivial as it may be, I consider it censorship when they stop being transparent. Displaying "Blocked!" when someone tries to access the site is, as you said, totally their business. Implying a successful HTTP connection but a missing file? Still, as you said, inconsequential. The attitude that leads someone to make it look like a 404 instead of a blocked site? That's the same attitude that makes them block emails on the presence of a text string.
I don't know how they have it set up, but the laziest way to block pages is to add them to /etc/hosts mapping them to 127.0.0.1 . If you do that in OS X and Web Sharing (apache) is enabled (and it might be on their machines, although I hear Mountain Lion got rid of it?), then navigating to http://blocksite.com/whatever.html will give a 404 unless the web sharing directory actually contains the file "whatever.html". So it's very likely a simple matter of a lazy configuration rather than a nefarious attempt to make you think that the blocked site doesn't exist (which, really, what would be the motivation there?).
404 is an accurate statement by the browser when the distinct hosts file maps xmission.com to localhost. A 503 error would be a forged response. 404 is the expected type of response with two separate modularized/encapsulated systems where the browser merely reports that it found nothing from the typed in URL. Saying that the site is "blocked" would involve creating a special facility just for this purpose.
I don't think this is at all like the ISP redirection pages that were more clearly non compliant with IETF internet standards.
mistercow's response explains it better. If it redirected to localhost, and there was a certain filesharing service enabled, then it's possible a browser was listening but obviously didn't have the specific file requested.
