Blood certainly can be edible, and is the basis for at least 2 noteworthy foodstuffs: blood pudding, and blood sausage. You won't catch me eating either, but in dark age times they were a vital source of nutrition for many poorer people. As for editing in that use, I don't know...
Personally though, I find that the current amount of blood in barrels shipped as trade goods by merchants far exceeds this culinary use.
What I would like to see is a new set of jobs available at querns/mills, and at furnaces, which would deal with the "way too many bones causing too many bone crafts." Issue, as well as the "what in armak's name do we do with all this bottled blood!?" problem. Simple: fertilizer.
Right now the only fertilizer we have is potash. I suggest expanding that to bonemeal and bloodmeal. (Bonemeal could be further burned in the ashery to get bone ash, which is required to make white glazes and chinaware, irl.)
Coupled with the food use for blood, that should solve all the trouble.
So, for a question for toady:
You mentioned in the dev log entry that there were problems with too many bone crafts showing up in the village markets. Have you considered other industrial uses for bones other than as a crafting material, such as bonemeal, or as a secondary material in the pottery industry, such as bone ash?