Even if you block a customer or mark for deletion, system will propose that customer. You cannot prevent this. But if you try to create a sale order for that customer, system will give a message that customer is blocked / marked for deletion. If you want to prevent this not to pop up the customer code while sale order creation, you have to go for sale order exit.
This is commonly faced problem at many sites.. Most of the clients I worked for implemented something to distinguish blocked customers with active ones.
One of the way is to add the string "BLOCKED" at the end of the name ... or in the SEARCH string field or some where it can be easily identified but not impact the business proces...
Again this is just one of the way to fix the issue. Your final solution depends on multiple factors....
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