Using blockhosts with iptables

I am running blockhosts on Gentoo 2006.1. I want to block at the network layer, and I want to do so with iptables instead of null routing. Well, to make a long story short, I enabled this in my /etc/blockhosts.cfg file :

IPBLOCK = "iptables -A blockhosts -i ! eth1 --source -j DROP"

Needless to say it doesn't like that, I think it is something to do with the option but I do not know any other way to wildcard so that it will use blocked ip addresses as the source. When I comment out the option, and I run /usr/bin/blockhosts.py --ipblock="iptables", it successfully adds a chain called blockhosts, and adds a DENY rule for every address blocked. It also adds a rule at the top of the INPUT chain telling it to check the blockhosts chain (INPUT -j blockhosts). Problem with this, is I don't know the rule it is using to block with, I assume it is a simple DENY everything from this IP rule. Is there some sort of default rule it is using? How is this working without the ipblock area of the cfg file defined?

details on ipblock

blockhosts.py --help will describe in detail the arguments accepted for --ipblock, and yes, it only accepts iptables or "ip route".

Then blockhosts.py follows the following method to create the blocking chain:
# use a user-defined iptables chain, named as SCRIPT_ID ("blockhosts")
# a rule is added to the INPUT chain to jump to the blockhosts chain
# the blockhosts chain uses DROP action for each blocked IP address

So, the rule applied is: iptables --append blockhosts --source %s -j DROP
where --source is passed the IP address of the host to be blocked.

You can see all the rules in effect by running this command:
iptables --list blockhosts --numeric