I see no other likely source for the dark elves to have attained their apparently non-renewable Sky Diamonds, and it perfectly explains why the village distrusts me.
I still don't want you scouting my colonies and more then you want me scouting your capital, and that wouldn't open a trade route anyway. I'll check this turn to see if there's anything worth settling along the lake for, but if not ... The best route is from your soon-to-be iron colony to my capital. Your canoes should have enough range to get from there to me.
One other piece to our trade agreement: I want you to help against the dark elves if they break the peace and attack me again. In return, I'll send some military aid if you need/want it from an aggressive NPC.
Yeah, your right, I suppose that does seem likely.
And yeah, it would open a trade route, since vanigo said a route to a colony would work for trade (as a road is automatically build between adjacent villages/colonies).
I'm not quite sure settling along the lake would be very smart, since it would open you up to attack from my (tiny) navy, as well as the dark elves if they want to attack you, with you being unable to assist them with your navy.
I think I should be able to handle any hostile NPC's I come up against. As well as thinking that it might be a long time before I run into one strong enough to challenge me (given that currently I suspect that I am more then the equal of the dark elves or the orcs).
However, if the dark elves attack you without provocation then I will not hire myself out as mercenaries to them for two turns after they stop attacking you (during which you can promptly stomp them till they desist), provided you can give me the gold that I would regularly get from mercenary work during that time.
EDIT: OOOH, I am stupid, I thought that you got money equal to half your population, but it turns out that you get money equal to half your prosperity.