*It's Alive!, it's Alive*
I've Necroed this thread as it perfectly matches the rant/suggestion I wanted to make.
The weird elven wood 'kosher' rules are IMHO dumb but if their something Toady wants in the game then so be it but FOR THE LOVE OF GOD FIX THE F***** TRADE INTERFACE! Their is no way other then mind numbing tediousness to keep from accidentally offering forbidden items. A 'cull on offensive items' option like the OP suggests is one idea but its sub-optimal in my opinion, if you forget to press that button before 't' your hosed with no recourse.
One of two things needs to happen, either the 'one strike and your out rule' should be softened substantially or the act of offending a caravan be changed into a explicitly act that can not be done by accident.
The simplest way to soften the one strike rule is have each act of offering forbidden items lower the merchants trade willingness by one level, this will give us 3 strikes if the merchant starts at default mood. At the same time each offer containing forbidden items will induce a counter offer in which the forbidden items are dropped from your offer, this would work very much like the reverse of the current style of counteroffer in which they cherry pick some of your items they want added to the offer. You'll see the pop up "The following items offend us and will not be trade" you accept and the items are culled from the offer.
This would make the current system at least bearable but the deeper problem is really the fact that their is never ANY circumstance in which it is desirable to offer forbidden items, the elves can never be tempted to break their kosher rules by a generous offer (which would present an interesting bit of strategy), so any UI that makes it possible to make such an offer is nothing more then a trap for the player to fall into! So the really REALLY MIND NUMBINGLY OBVIOUS SOLUTION!! is just Grey out every forbidden item and prevent it from entering into the offer, presto elves are happy and I can trade without shooting myself in the foot.
The only objection I can think of is a role-playing freedom argument that I should "in principle" be able to do "anything" damn the consequences. Wile I agree that's a desirable goal its clearly counter productive to actually game play in this situation. Here is an analogy, say their is a combat system in which I could choose from a list of body parts on my opponent to attack, "slash throat", "slash arm" "stab belly", all very interesting an fun to play with. But now suppose YOUR body parts are also in the list too and aren't labeled as such! That's actually more 'realistic' then the earlier system because you CAN in fact slash your own throat at any time but its obviously a UI nightmare waiting to happen. Destructive and Irreversible inputs need to be shielded with safeties.
If anyone wishes to have the means to offend/insult the caravan and make it leave immediately then just give us a command to do just that and shield it with a warning pop up. Best of all theirs no need to have it depend on any material object, I can just spit in the elf's eye, flip him the bird and curse till I'm blue in the face. That should send ANY caravan packing immediately no matter how liberal their trade policies are.