How to blacklist a specific update on Windows 10?

As you are talking about the driver rather than the regular update, there are several possibilities to do so. Follow the steps below for one.

• First, run services.msc and disable the Device Install Service. This will prevent the automatic drivers installation or update. And in fact, for some reason, it will also prevent any manual driver installation too, which is not what you want, so read on.
• Go to device manager, right-click on your device and select Remove, then check the box to remove the driver files. You'll find that the relief is now permanent: the driver is not returning because of the service disabled on a previous step.
• Open explorer, go to C:\Windows\System32\DriverStore\FileRepository and find the folder with your driver there. Try to remove it - this won't work, so just rename the folder. If renaming also doesn't work, change the ownership of FileRepository to your user and grant all access to yourself.
• Reboot, go to FileRepository again, and this time remove the previously renamed driver folder.
• Run gpedit.msc, go to Administrative Templates\System\Device installation and set Specify search order for device driver source locations to Enabled: Do not search Windows Update. After that, Device Install Service will stop searching for drivers in Windows Updates. And as we, on previous steps, removed the driver update also from the local storage, it will not find it at all.
• Now you can re-enable the Device Install Service disabled on the first step - it will no longer be able to bring in the driver update.
• Unfortunately, the windows updates service still can bring the driver update in! So, before re-enabling the Device Install Service (without which the driver can't be updated), in gpedit.msc you go further down to Device Installation Restrictions and enable Prevent installation of devices not described by other policy parameters. After that, neither the Windows Update, nor the Device Install Service can update the device drivers.

Yes, this solution does not allow you to block some particular driver or some particular update. Instead, it blocks all the driver updates. But its still better than nothing, because when windows keeps re-installing the driver update no matter how hard you try to prevent it, it all gets very annoying.

Don't waste your time on the "Hide update" tool from Microsoft that you mentioned: when you do the above steps, this tool will start seeing and blacklisting the driver update, but the windows update service just ignores that! It keeps installing the update that is supposed to be hidden. So this tool simply doesn't work.

Why in your case it doesn't even see an update, is because the Device Install Service starts installing it instantly, after which it is no longer a pending update and is therefore "uninteresting" for this tool.