I really like the way emissaries are limited by the amount of available paper. Standing emissaries are using that paper, so you can't hoard them. The amount of available paper can be increased, but it's costly. It does not prevent the player from focusing on diplomacy, but limits going too extreme with it. If we think of happiness as the equivalent of paper, a currency that allows certain activities, then every activity that we don't want to see used too often, should be consuming happiness, the same way an emissary consumes paper, and release it once his job is done. When paper is consumed, nothing bad happens. Only you cannot produce more diplo units until the paper is returned. Maybe we could ask the same to happiness. Instead of bad things happening in your empire due to your low happiness, just limit the things available for the player. I believe settlers can't be produced while unhappy already.