How to report a player using a work around to say something harmful to someone?

Report them like you would anyone else. You can explain more with the report.

The best option is for you to contact activision and treyarch directly about this issue, also it won't harm to report the gamertags doing this modding/hacking by using the xbox reporting feature. Here's how to report them

enforcement.xbox.com/.../Submit-Player-Review

I agree that there does need to be repercussions against players or are actually being toxic or cheating. Reporting someone for that should be the impact on the accounts, not blocking. Blocking should be used to stop communications or contact from that player,
but should NOT harm the account it is used against.

When someone is reported, the report is reviewed and action is taken. Blocking someone hurts a players reputation but is never looked at or justified. I couldn't care less if someone blocked me to avoid playing against me, but this should not stop me from
playing other people as it does now (avoid me reputation has pretty much disabled my ability to play any matchmaking games).

Hello, first it's a pleasure to be able to help you today.

My name is welcome to the community.

Hello Screwmicrosoft#, if you want to report a player or a situation that happened in the Xbox community, you should follow the link procedures below.

"Xbox removes harmful content and behaviors that don’t follow the Microsoft Services Agreement as explained in the Community Standards for Xbox, but we can’t be everywhere at once. That’s where you come in. Each member of the community can help us keep Xbox fun and safe."

"Your reports alert us when other players aren’t playing by the rules. If you see someone or something that’s not following our policies, submit a report to let us know that there’s a potential violation we need to investigate."

How to report a player

https://support.xbox.com/en-US/help/family-onli...

I think they need enough people to report that person for it to work because someone could not like a player and report them for something they didn't do.