The way I see it, a 'blockade' could be done in the game in several different ways.
a) Place diplomatic pressure on nations to prevent them from trading 'legally' with a nation that has sanctions on it. This would be especially good if you were required to form some kind of 'diplomatic agreement' as a prerequisite to all future trading with that nation (as it was in 'Birth of the Federation')
b) Place units in the way of a key city in a sanctioned nation. Said nation will only be able to trade if it can trace at LEAST one viable trade route between it and the nation it wishes to trade.
c) If a trade route passes through your nation, you could repeal a right of passage to the nation you wish to place sanctions on. Any nation that requires a trade route to run through your civ to a sanctioned nation will now NOT be able to trade.
d) Banning a resource can prevent a nation from trading that resource with you AND prevent any 3rd nations trading that resource if said trade route has to pass through your nation!
e) 'Pillaging' a trade route will break it, essentially creating an embargo. You can then keep units in the vicinity to 'enforce' the embargo.
f) destroying critical trade infrastructure in the nation you wish to sanction might also prevent said nation from trading.
Of course, all this deals with LEGAL trading between civs. A civ under sanctions should be able to 'smuggle' goods into and out of their nation.
Smuggling routes, under my model, would be 'faster' (worth more), weaker but more expensive to maintain. They could be set up in one of a few ways.
First, if you wish to trade with a nation who is under diplomatic 'sanction', or if you are under sanction yourself, then the trade advisor will say so, but ask if you wish to 'smuggle' goods. This would also be the case if you wish to trade a resource than either you or your potential trade partner has banned. Additionally, when establishing even a normal trade route, you could be given the option to create an 'illegal' trade route. Aside from what I mentioned above, said trade routes would be financially more lucrative than a standard trade, they would be 'stealthier', but would create corruption within the cities of the two nations involved-though the corruption would, on average, be worse in the recipient nation than the dealer nation!
EDIT: One final point to answer Plastiques criticism of blokades in the 'line model'! Not only do you have to build another caravan in order to renegotiate the trade route but, in my model, the amount of maintainance you have to pay for a trade route depends in part on the distance between the two trading cities. The more hexes it has to travel, the more it will cost you. Terrain will also alter the cost of the route. In addition, I have also pointed out that an especially long trade route may take an extra 1-2 turns to take effect, not to mention the fact that the base value of the traded goods will decline over long distances, because the 'assumed' number of trades in a turn will be fewer over that distance. So, as you see, blockading a single, short and lucrative trade route might in fact make a new trade deal with that civ a pointless excercise, for one of the parties or both!
Anyway, just some thoughts.
Yours,
Aussie_Lurker.
oh and, btw Plastique, I have no recollection of people 'dropping' one model in favour of another-so please don't go speaking for everyone OK? Just some friendly advice

!