For block predictions, it's just an areal average. Block standard errors are more complicated than that, and I think that's what your colleague is getting at.
GA Layer to Grid performs block predictions from a kriging model you've already made. It does not calculate block standard errors, which is the big difference from true "block kriging". True block kriging tries to reduce calculations by incorporating the areal units into the kriging step, and it handles the standard errors for the polygons differently (the calculation of block standard errors is not a simple areal average of the point standard errors). Sorry for the terminology issues; I probably should have consistently said "block prediction" rather than "block kriging."
Again, we decided not to implement full block kriging because geostatistical simulations do the same job a lot better.