My dwarf used up a block card when the opponent used Dwarven Battle Cry. Not only did I lose my block, I also didn't get to draw a card. That has to be a bug, right?
No, it's as intended. You as an enemy aren't "aware" of what is being cast by your opponent, so thus you block everything you can - as it happens, it would have been good not to, but as you couldn't know this you're out of luck.