I never accept any embassy trade till I have settled my first 4 cities, that is unless they have found me already and are far enough away from me...
If you need their embassy for quest or sth, just give em 1 iron or horse(2 for border opening). Should suffice most of the time.
I see a discussion regarding aggressive vs peaceful AI. Let me tell you sth, there are no peaceful AIs on higher difficulties. Sooner or later they will find a reason to attack you, whether be land, wonder or his "better friend" denouncing you. Or simply because you have a weak army and they see an opportunity towards their domV goal.
As for Caravans from neighbours, it doesn`t matter whether you have shared embassies or not. If they see you they will send Caravans and DoF will follow without embassies. So if you happen to see Caravans early on from your neighbour, that means DoF offer will follow.