I agree that there needs to be some way of making sure that dwarves aren't completely cut off from the rest of the world - dwarves can drown, after all, which means (presumably) that they need to breathe, which means they shouldn't be able to wall themselves off underground.
This suggestion would be far less CPU intensive & far simpler than tracking air loss/flows, so I think it's a good idea.
In any case, I think the idea that more space equaling a smaller chance of going crazy isn't necessarily the only logical solution. You're assuming that dwarven psychology matches human psychology closely (which isn't true in the case of DF dwarves - see dwarven reaction to socks, their happiness with dining rooms, &c. &c.) - perhaps it is the 'unable to leave' part that makes them go crazy rather than the 'enclosed space' part. In other words, it doesn't matter how much space there is underground, if a dwarf can't leave the fortress and strike out for some distant outpost to start afresh, he goes berserk.
Yup. While tracking air would be an amazing addition, I'm just not sure the current engine can handle it, as air would probably be sort of like water in terms of how demanding the calculations are, and even a moderately sized water project can kill framerate. Imagine having that for the entire map!
My prefered solution to the siege thing would be to allow creatures to climb up and down cliffs, albeit very slowly. Thus, goblins could climb down airshafts into your fortress, and if you don't have any airshafts, pretty soon you won't have any dwarves either.
However keeping in mind the need to keep CPU cycles to a minimum, unhappy thoughts from being sealed off would accomplish roughly the same thing while not making your computer run at 1 FPS. However this would only work if the unhappy thoughts are serious enough that only a few will cause a dwarf to go insane, such that waiting out a siege which can last an entire year may not be feasable unless you have a legendary dining room, cook, brewer, and every dwarf has their own personal palace. And even then, your fortress should be very unhappy from being under siege for so long.
An alternative solution would be to have goblins telepathically cause unhappy thoughts to all dwarves on the map, but that would prohibit goblin zoos. For example, "Urist was worried lately about goblins in the area." With enough of those piling up, insanity. But I don't think thats quite as elegant as instead linking it to being able to reach the edge of the map.
Also, going insane by being unable to reach the edge of the map would allow the creation of dwarven arenas. Lock the hammerer up until he goes berserk, then drop cats into the arena with him. And so forth.