The option on Special:Block labeled:
Prevent this user from editing their own talk page while blocked
If the user is creating a sitewite block (which is what it does), then the site wide block (logically) prevents editing from anywhere on the site.
The option should be reversed to be:
Allow this user to edit their own talk page
and the option would be unchecked by default.
This will become more of an issue when T2674 is completed as it will be more confusing if a user blocks another user from the User talk namespace.