One common feature of network DNS filters is also to enforce search engine safesearch, which is what this feature request would enable for Kagi. Blocking just the external websites isn't a complete solution because images etc can still show up on the search engine site.
Re there being other search engines out there that don't allow blocking safesearch, this is true, but when you're thinking of which search engine to recommend, it's still a point against Kagi that it can't be rendered safe. There are Kagi kids' accounts now that do it, but they're quite restrictive (some features can't be turned off etc), and also not a great choice for IT admins with adult users.
