Axis & Allies Developer and Playtester; War of the Ring Editor and Playtester
The FAQ explicitly allows Axe and Bow to block Foul Thing, so I agree. Guide abilities are even more built-in than play-on-tables.
I think that means also that Merry and Pippin, when guiding, can seperate themselves (to death) to prevent Isuldur's Bane from working. Those little guys are flexible!
Based on the wording on the cards, I'd agree.