So what are the other sources of a block besides another interrupt?
keep reading, it's in "the bible" things like "the first instruction after a reti WILL be executed"

Does the main program continue to execute while the block is on?
all 'blocks' are not "nothing executes" but "execution continues till no block". What is executing is not necessarily main, if a high priority is hit while a low priority is executing the return will be to the lp ISR.

I'm using a Atmel 89C51ID2 (Not sure if it matters for this question)
always include the derivative.

Erik