You're correct with the units within their borders Iguana, thanks for pointing that out.
but I would assume the peace treaty would pop up and let you cancel it just like you can a resouce deal when you renegotiate
If you have the auto-renegotiate deals on, the peace treaty comes up between your turn (at the end of yours)... SO if you break it in that manner, they'll get the first war turn (reducing any element of surprise you might have). This also ensures the renegotiate happens at a 20 turn interval... So 20 years of peace followed by your one chance at war followed by another 20 turns of peace if you don't declare war that turn.
If you have the auto-renegotiate deals turned off, it won't pop up for renegotiation on the 20th turn... So you could wait until the 25th turn before breaking the treaty (allows for much more flexibility).
Basically it lets you check the outstanding deals you have so that you don't trade spices to a neighbor for only 5GPT the whole game when you could have increased the cost to 20GPT or more.
Hmmm... If you're keeping deals like that for the whole game, then you're definately not paying enough attention to dimplomacy.
Use the foriegn advisor to regularily check your outstanding trades and renegotiate if you see the opporunity only. Often, the AI won't have the treasury to increase what they're paying. To check to see how much they'll be willing to increase, go into the diplomacy screen and offer them something for gold per turn, but don't accept the deal. What you are looking for is the 'max' gpt they can offer (if they offer 50gpt, you know they have alot of extra cash. If they offer no more then 2 or 3, then they're broke and you're not getting much more out of the deal... Infact you'll likely lose gold if your renegotiate then).If they've got extra gold to spare, then renegotiate.
The values of resources (luxuries especially) are based on the number of citizens it affects. An AI with alot of cities/citizens will pay more for the luxury. During any point in the game where you think the AI has gained alot of citizens recently (right after sanitation comes out for example), definately renegotiate. Oh, and unless apart of some larger deal (3 luxuries for 2 luxruies and gold maybe?) never trade more than 1 at a time. A third luxury adds 2 happy per city with a marketplace (not just one) which means they'll pay extra for their third they wouldn't have otherwise.