I recall reading that Toady One wasn't hell bent on not adding bio-waste to DF such as excrement and urine, but he would only add it if someone could come up with a fun way for it to be included, and not necessarily "fun" in the Dwarven sense. (Although, with what I have in mind that could still be possible.)
Note: Some of this thread is based on knowledge and ideas collected from a hodge podge of threads that I have viewed and agreed with wholeheartedly yet I cannot remember their titles.
I believe that if the suggestion of more diseases other than say, cave adaptation (Which isn't a disease at all, it's a condition like sun burn) is added then could come the matter of figuring out ways to dispose of the faeces in a sanitary manner such as creating a sewer system underneath the toilets which leads into a running water supply and dissapears or breaks up, who knows. This thread isn't necessarily about the excrement itself, it's more about what it (and possibly rotten or disease riddled corpses) could do.
If left around or god forbid it got into your water supply, dwarves could easily suffer from a variety of diseases from the unsanitary conditions, possibly even cholera.
"Monom Mebantekkud, Peasant"
"Stricken with Cholera!"
"Monom Mebantekkud has been miserable lately. He has suffered from horrific diarrhoea lately. He has been vomitting blood lately. His skin has become a blueish colour lately. He admired a fine bed lately. He was caught up in a new romance lately."
"Monom Mebantekkud has succumbed to disease!"
Although I'm not entirely familiar with cholera, the possibilities for disease and fecal matter are endless, possibly putting far more use to the dissecting skills to come up with herbal medicines and making that planned profession for doctors all the more useful.
Now, I'm sure you noticed in the title I mentioned biological warfare. Well, what if any living creature besides something like a fire man or demon could be affected by disease?
Note: The following may require a few changes to sieges to make it entirely effective.
Imagine the goblin siegers arriving and then milling around your now forbidden doors.
A peasant appears in the corner of your eye and you smile devilishly as he pulls the lever and retracts the bridge above the goblin's heads and the dung and corpses rain down upon them.
An uncertain ammount of time passes and by now the goblins are stricken with a variety of foul diseases, deeply reducing their combat ability as they vomit and become stunned in a manner akin to cave adaptation. Finally, some goblins could even succumb to their diseases dependent on the severity, effectively annhilating the goblin enemies in a manner less efficient but in my opinion far more interesting than magma or cage traps.
After all, was it not true that disease riddled corpses of animals and men would be thrown in catapults at enemies during sieges? Perhaps some kind of dwarven bubonic plague could exist and if used in biological warfare, the game could harken back to sieges of human history?
The possibilities of this are endless with some of my ideas being based on the original lycanthropy/zombification disease thread: Perhaps an announcement appears and a dwarf (or dwarves) staggers in from the map boundaries from your parent civilisation, but this is no migrant. This dwarf is haggard and fetid and lets out a ghastly moan. This is a dwarven zombie, possibly even a former merchant to add to the drama and mystery.
Capturing this dwarf without letting it bite your dwarves, preferably multiple zombie dwarves, could allow you to unleash an immortal group of unspeakably dangerous disease carriers on the goblins, infecting them (provided the zombification isn't based on black magic, although this can still be possible. Magical diseases?) and decimating the goblin troops.
Although this may seem like a great deal of nonsense to go through to simply kill a few dozen goblins, isn't that the whole point of the dozens of rube goldbergesque devices and systems created by players to make goblin or maybe even for our modding players, orc killing, fun?