I am getting this same issue and none of the support documents I have found so far, or online support can resolve this issue. Issue occurred right after my upgrade to iOS15. Same error message that I am getting facetiming my parents. I had no issues a couple of days ago, but yesterday and today we cannot facetime.
This is not happening with any of my other contacts, just this one. I have never blocked, nor are they currently a blocked contact.
"You are joining a facetime with a blocked contact"
This is definitely a bug in the iOS. Needs to get investigated by the developers at Apple. Its happening to more then a couple of people. I have found online posts as well.