But I don't agree with the implication that medieval Europe wasn't a market economy.
Your points are well taken. Political and economic systems often come out to the same thing. In a way really, there is barely such as thing as "not a a market economy" since people always want something. The question is what is in demand and what is in supply and that can dramatically change what political system there is in place to handle wealth. For example, not until ships went to the new world and started coming back with huge amount of treasure did property rights emerge. These rights emerged because nobles and such didn't want to risk lots of money on a venture if they were not certain that they could keep the bounty of that venture.
If dwarf fortress were thought of in feudal terms I think it could address the issues of money creation and the like that plagued the previous economic implementation.
The biggest challenge I see to the implementation of the ANY economic model in DF is what someone pointed out earlier in the thread, the fortress is a planned economy.
It seems that the only way to escape the planned economy model would be to represent you, the player, in the game as an economic actor. As dwarf who then must keep power (coup d'état could add a lot of FUN to the game), convince others to build what you want them to (presumably through force and persuasion).
I haven't fleshed it out and it might alter the game enough to be either A) another mode or B) just something we wouldn't want.
My idea is you play the role of the expedition leader. When you embark, you have some choice over who the leader is because during the game, while you control the leader, his traits and wants will affect what things you do. For example, let's say he is just in love with Gold, maybe if you don't make sure all his furniture is made of Gold he goes mad, or maybe he hates cats and so you have to kill them all...i don't know.
Now, as expedition leader you would belong to the royal family and be a noble. You would have all the weapons and be the defender of the rest and thus rule over them.
The other dwarves would have progressively increasing wants (probably determined by skill and maybe some by age) and how you meet those would determine whether they support you or not (and how strong you are).
When other nobles come along, you either submit to them (so they can put production orders in, etc and if those don't get done you get punished--even potentially death, a lose condition) or you can try to take them out of the picture ( a little civil war).
You would treat your soldiers the best because you want them to be loyal.
Traits such as a lying could also be used, a liar who is made book keeper for example might (out of laziness) simply make up numbers. So managing who you have do key jobs would be important.
As for the economy, you would somehow choose how many hours was a dwarf's own and how many were yours. This would effect their happiness. In the hours that are yours they would fulfill the production orders you have given. In the hours that are theres they would sleep, eat, drink, mill about, and perhaps even be able to make things for themselves (I'm not sure how this would work).
Like I said, it isn't fleshed out. I see how it could be a lot of fun but I also see a lot of potential problems.