Try ignoring the message and finish typing the e-mail address. The "invalid" message just means you haven't typed the "@system.com" part of your address yet. Normally, I only see this message if I'm typing slow or if I pause to look for something else.
When you block a person, they can no longer invite you to a private message or post to your profile wall. Replies and comments they make will be collapsed/hidden by default. Finally, you'll never receive email notifications about content they create or likes they designate for your content.
Note: if you proceed, you will no longer be following .