The issue with this approach might be if a muted user invites another user to a certain topic that topic will become muted for invited user. They will not get anymore notifications from that topic just because a muted user invited them to that topic.
Also in case of PMs, inviting a user will create a small action post which will make other participants believe that invited user is aware of discussion/conversation, however since the invite was from a muted user the invited user will not be aware of the conversation, and moreover the future mentions will not create any notifications if we set notification level to muted for that PM.
This sounds like a better solution but the error message will raise eyebrows and the curious inviter might eventually realize that they have been muted? 
@codinghorror any thoughts about the potential solution here?