Looks like you’re making good progress! Using Scrivener+Pandoc is definitely the way to go, and I’m happy to help you achieve what you’re looking for—I have lots of practice, as this is how I wrote my book whose publisher required a docx file.
To troubleshoot your blockquoting issue, my recommendation is to see if this happens also when you are just using Pandoc alone (no involvement with Scrivener) to convert a simple md file to docx on the command line. If that has the desired output, next try doing the same thing but adding in your reference to your reference docx in your command. Still fine? Then I guess it’s something to do with your Scrivener set up and we can go from there.
Once you get block quotes working properly in your Scrivener-to-docx setup, next ask yourself if you’ll ever need to have the line that follows a blockquote to be unindented—for example, where the line afterwards is meant to be a continuation of the paragraph that preceded the blockquote. If yes, then you should consider incorporating the complex-paragraphs lua filter described and linked to here.
If you end up not being able to solve your first block quote problem, let me know. I could probably share my personal Scrivener template and you could see if that works for you. As the post I link to above notes, this template is set up to control post-blockquote indenting in my own special way (although no reason the template couldn’t also be used with the complex-paragraphs filter as well).