I do agree, the atom-smasher needs to be fixed. However, as stated above, there needs to be some sort of equivalent for all the useless items we get, the furnace idea sounds like it would work, but it would take any item. Including the artifact mace that your weaponsmith just made. Plus it costs something to use, three fuel! I can make three swords for that much, and it doesn't seem that realistic.
There should be an atom-smasher, but perhaps a one tile wide one that wouldn't hurt creatures, and like a floodgate wait for humans to be out of the way before it closes/opens.
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I say keep the atom-smashers for those who need them for now, add new features to gradually make them less needed :-
Optimizing hauling (loading zones where dwarves haul containers - a new container which can hold multiple stones, wheelbarrows, dwarves using backpacks etc. wagons pulled by domestic animals which can be loaded up / sent to place needed - lots of options here).
It takes about same effort to move a single seed or a sock now as to move a statue. dwarves should collect multiple similar objects (those destined for the same stockpile), eg lots of seeds, lots of clothes/finished goods, and when ready, deposit them all to the same stockpile.
Standing production orders for managers would reduce excess production to player-controlled margins, while being able to better control materials used for specific things would eliminate all the Diorite floodgates when I'm trying to make a few Bauxite ones.
Be able to mark wooden objects to be burnt to ash or charcoal at the wood burner - recycling and a fuel source - this would also make fertilizing fields practical, meaning more 4x as efficient food and booze stockpiles. A composting system (or manure system) could also be added for another source of fertilizer. This would be a way to dispose of excess plant material. Maybe clothing articles could be thrown into the compost too, or burnt to ash (but not charcoal) this works IRL.
Stone items could be recycled by crushing them to a powder (stored in bags) and mixed with lime to make cement powder (a very ancient building technique). Several bags of cement (eg 'Diorite Cement') could be pour into a channel, along with several buckets of water to fill the channel with cement. Alternatively, they could be caste at a workshop into cement blocks and use like normal, which would require less changes to the game.
Also a little idea I had which doesn't really affect # of objects is let bags be stored in bins rather than take up a whole square in a stockpile (i.e. just like with seed barrels etc).