Currently we can hide with '#' but it will be nice if it's hidden by default just like gmail. There is a buffer local variable called mu4e~view-cited-hidden which if set to t hides the cited text.
Although, this might not be good in case some one replies inline. I don't have strong opinion on this either way is fine.
That actually was the first feature I wanted to implement, until I realized I had to write everything else before.
So no worries, I'm working on it.
And thanks for the pointers!
I've moved the repo to https://gitlab.com/ambrevar/mu4e-conversation.
And I've properly implemented hidden citation there.