Remove elements added dynamically without entirely blocking the script that produces them.

Yeah, this seems like the blocker here. Thanks for thinking this through more effectively than I did.

Using a proxy to do DNS blocking has significant failures modes. They wont work on youtube because youtube uses the same endpoint to serve the videos and ads for starters.

No, not DNS blocking; content parsing and editing before it arrives in the browser. I agree DNS blocking is mostly trash. It's not just youtube/google, but anything that uses Akamai will be pretty hosed too.

Then the problem is you have to wait for the ping to your proxy/emulator every time you want to run some JS because it needs to run whatever blocking script youve got on the output.

provide a UI within the browser chrome

True. Good point.