It looks like all the previous threads on this topic devolved into political blather, so let's use this thread to drag private property back onto the scene.
One way to allow the player to retain control, while giving dwarves private property would be to mimic the Eminent Domain system, here in America.
The system:
Urist McSkeezyDeveloper figures that his land would be more valuable if a road went through the space my house occupies.
He petitions the local government to seize my house (paying me a percentage of it's value) and pave over the top of it, pointing out how much more taxable income he would have if he had his road in place.
The local government weighs the pros (more money) against the cons (civil unrest and homelessness), and wisely decides to let me keep my house.
In respect to DF, you could have dwarves ask for things that belong to other dwarves(like pet when they are starving), and the player could be permitted to grant this request or deny it. Supposedly, Eminent Domain is a forced sale, so the player should have the option of paying the injured party part or all of the value of the item or animal (this is unlikely to appease someone who is attached to an item or pet).
Being able to forcibly buy out items, at a fraction of their value would be nice as well. If badly damaged clothing was valued realistically, you could even have an option to automatically buy rags, when their value falls below a certain point.