But we've moved away from the original post. Pilsu's suggestions are, for the most part, very good.
Both True. The majority of these suggestions are actually, quite good, and I should have said so, before I started attacking the weaker points.
In the vast majority of these cases, I agree that there is a problem, I just feel that the proposed solution will create more problems than it solves, and that a deeper level approach will be required.
For example, it is weird to max out engraving, just by smoothing, to the degree that this is the only situation where I might advocate a skill cap, but simply splitting the skills fails to address the root of the problem. --namely that the distinctions between the stone related skills are arbitrary and confusing. Adding another one will only make this problem worse.
Likewise, obsidian swords are too easy to make, and shouldn't compete with iron, let alone steel, for base price. Simply removing them, instead of actually fixing them, would be unacceptable at this stage. Once we have mat properties, I don't think the other issues will be a problem, and those other problems could be fixed (or at least mitigated) by lowering the price, and requiring separate handle manufacturing.
Proper bedding would be nice to have (as the current system is painfully abstract), but I'm concerned with the effects it could have on the early game, especially if bedding requires stuffing of some sort. Rather than starting with feathers, I would recommend bringing in sheep and shearing (along with milkable cows), as a feather industry would take too long to set up cheaply (as butchering destroys the chicken, whereas sheep are renewable), and thus feather beds are a better grade of bedding, reserved for more developed fortresses. Additionally, it should be possible to manufacture a simple sleeping mat, from a single bolt of cloth, to allow players the freedom to embark with neither chickens nor sheep. Monster feathers would have to be inferior to chicken feathers, to give chickens a reason to exist, on chasm maps (Think goblin armor).
All this creates a lot of extra items and item types. What measures can we take to prevent these from becoming a nuisance, akin to stone?
If wool and feathers require bags to store, the cloth demand of a bedding industry could be very considerable, for a small fort (--Enough to make growing enough for both food and cloth an actual challenge? --Probably not, but we can dream.)
Perhaps, the bad and the stuffing are simply merged into the mattress, at the tailors shop. This gives us a simple progression of
bag->bag of stuffing -> mattress.
I'm still not sure how to deal with animals that require a bag to butcher. Perhaps a "Butcher to bag" and a "Butcher without bag" command should be added to the butcher's menu, as it's one of the few menus that doesn't get flooded, it wouldn't hurt anything, for now.