As I said in the OP, this thread will be updated regularly as new suggestion are been made and here's a reply from theymos
Update from theymos

Forgiveness and de-escalation are key to getting Trust working smoothly:
 - Forgiveness: Often people make fairly small mistakes, but then they seemingly get red-trusted for life. This isn't really fair, and it discourages participation due to paranoia: if you think that you have a 1% chance of running afoul of some unwritten rule and getting red-trusted for life, you might just avoid the marketplace altogether. Red trust should mostly be based on an evaluation of what the person is likely to do in the future moreso than a punishment/mark-of-shame.
 - De-escalation: If some people end up locked in a feud where they're only really giving negative trust to each other in retaliation for negative trust, then one of them should propose burying the hatchet and removing the negative trust. Otherwise it never gets resolved, and everyone is worse-off for it.