What could explain this? Is it possible for the ISP to block BitTorrent peer discovery but not file transfer? More generally, how can an ISP block BitTorrent?
Peer discovery in bittorrent uses one of two mechanisms.
Originally bittorrent used centralized trackers, these exchange peer information over normal http/https . This worked and still works great for legal torrents, but for illegal torrents the trackers represented a single point of failure that could be blocked or shut down by the authorities.
There is also a distributed hash table "DHT" system which relies on peer to peer UDP communication. While I haven't studied it in detail I suspect it would be easy to detect through deep packet inspection, and even with shallow packet inspection it would probably ring "P2P" alarm bells even if they couldn't detect exactly what peer to peer system it was.
Data connections on the other hand are regular TCP connections to a relatively small number of peers. While i'm sure there are ways to identify them (especially if "encryption" is turned off) I suspect it would be a lot more effort than detecting DHT traffic.
If an ISP is trying to clamp down on illegal file sharing I can see sense in trying to target the search and discovery protocols rather than the data connections, the traffic volumes are smaller and there is less chance of hitting legal traffic.