To be fair, in my experience there seem to be a lot more people frustrated with ads than scared of the government.

Someone who wants privacy/anonymity is likely to not want ads, but I think those who don't want ads is actually a larger group.

Why would a browser or extension client side not be better? Adding an intermediary would add latency needlessly...

It's not always possible to even modify the client, think of the embedded browsers in "smart" devices as well as the increasingly-locked-down mobile platforms. But as long as installing your own certificates still works, you can continue to MITM your traffic and modify it before it gets to the client(s).

Because blocking at the cloent edge node already has had the bandwidth consumed from the carriers end provided, no?