Whitewashing is distinct but related things.
- Changing an existing non-white character to be a white one.
- Using white characters in a setting that would typically have non-whites.
- White actors, directors, writers, singers (i.e. content creators) receiving the majority of awards and accolades.
The fact that it is white people being accused off this action fits perfectly with an already existing definition of whitewash (or whitewashing):
A deliberate attempt to conceal unpleasant or incriminating facts about a person or organization in order to protect their reputation.
In context it means that the white community is making deliberate attempt to conceal the contributions of the non-white community to the arts because it is considered unpleasant. This is why it is such a big deal, it is a form of racism.
If you are going to argue against any racist undertones being associated, the primary definition is to basically paint something white (as one would expect).
A solution of lime and water or of whiting, size, and water, used for painting walls white.
For works of art your would be taking a non-white character and almost literally "painting" them white.
Yes, portraying Blaise as white would be considered whitewashing.
Or at least it would be after the race of the character was established. If the race of the character is not established or even hinted at it seems reasonable that one would assume the Blaise would be white given the context of the story (majority white nation, white author, majority of established characters are white; unlike say Cho Chang, who based on the name would reasonably be considered of Eastern Asia descent).
Once the canon fact of Blaise's race was established, continuing to portray him as white is whitewashing. Since we are dealing with fan-fiction the waters are a bit muddy, the writer of the fan-fiction is essentially creating their own story and own character. However, it is easy to see why the "accusation" of whitewashing would be made in this case.