Excellent thread and tough questions to be answered.

I do think documentation of known CSAM hosting instances is really important for people who want to become admins.

As Dana Fried posits, it really should be opt-in and not opt-out.

Also, this isn't the first time the Fediverse has run into this issue. I'm having trouble finding links to support this, but early on in Mastadon's life, the largest instance was a Japanese instance that hosted a lot of manga images, including images that would be considered CSAM in the US but not in Japan, due to differing laws on drawings of minors in sexual situations. ~~The US bans all of it,~~ (EDIT: corrected, please see TauZero's comment) while Japan has an exception for drawings, seemingly under the idea that "no one is being harmed in a drawing." This created huge problems initially and resulted in the Japanese instance essentially being blacklisted by most Western instances.

Finally, took some digging, here is a good link with a breakdown on when Pixiv spun up their own Mastodon instance:

https://ethanzuckerman.com/2017/08/18/mastodon-is-big-in-japan-the-reason-why-is-uncomfortable/

In April 2017, Pixiv began hosting a Mastodon instance – Pawoo.net – that quickly became the most popular Mastodon server in the world. If you have a Pixiv account, it’s a single click to establish a Pawoo.net account. And if you monitor the feed on pawoo.net, you’ll see that a great deal of content features lolicon, much of it behind content warning tags. In response to the growth of pawoo.net, a number of large, predominantly North American/European Mastodon servers stopped federating posts from the Japanese site, as they were uncomfortable with lolicon appearing as part of their feed. Scala reports that Rochko modified the database on mastodon.social to make it possible to “silence” pawoo.net, so that posts only appear if you explicitly choose to subscribe to users of that server.

Needless to say, not every Mastodon administrator is excited that the protocol is being used to harbor lolicon. The terms of service for mastodon.cloud – the fifth largest Mastodon instance, and the largest based in the US – now explicitly prohibit “lolicon, immoral and indecent child pics”.

In other words, this has been a problem, and will continue to be a problem, and I hate to say it, but the developers at Lemmy probably need to add more tools to be able to combat this problem, possibly up to and including making Federation and opt-in instead of opt-out, where when you initially set up your server, you have to choose with whom to Federate.

It's doubtful small admins could afford the corporate tools to detect and remove CSAM automatically. It's also unlikely that the FBI would just hand off such tools to small-potatoes admins, probably arguing that access to the CSAM database could be misused by people who want to find CSAM, and access to the database could give them tools to do so. Thus some rando won't just be given the same access to such tools.