First i want to quote this article (
http://www.dwarffortresswiki.net/index.php/Stud) from the DF wiki:
[...] The type of decoration does not affect the value it adds to the item. Spikes are more common decorations. Bands are less common decorations. Rarely, a picture of something will be engraved into the item, similar to engraving a natural wall or floor.
My suggestions are now:
(1) The chance that race and culture specific symbols occur (dwarves, Lobsters, wavelines [...]) should be a bit higher or depend on the skill of the decorator.
(2) that the pictures that can occur on an item can be improved and extended by following acts of decoration for example by adding details to it.
An "dwarv surrounded by dwarves in dog leather" could for example get by an Gemsetter eyes of made from sapphire. Which should read like this " sapphire eyed dwarv surrounded by [...]"
An studding could add an belt to this dwarf with the dwarves name on it (the name should have to be tracket) to our dwarf. Example "Olon Ironblood with Saphireeyes and an Belt from Silver showing his name is surrounded by Dwarves" etc.
Normal decoration could have improvements too. This would look like this: "[Generic Item] Studed with Gold. The studding is hold by silver nites. The studing is encrusted with 3 Moss agates."
(3) that Normal engravings can be decorated too. Example: "On the wall is an picture of the Sun surrounded by stars. The sun is illuminated with Gold. the Stars are encrusted with diamonds"
The "layers" of decoration should maybe limited. There is no actual "practical reason" behind this suggestions. Its only for deepness of the game and awesome pictures for the minds eye.
Decorations like this were made in history. Palaces in india had for example theyr walls encrusted with gems. In europe mainly pictures of Saints and Gods etc were encrusted or illuminated with metals (holy auras from Gold etc.).
So now feel free to discuss and add your opinions.
edit: (4) An option to take away studdings, encrustings and alike would be neat to recover Metals or Gems. I hate to see Rubys and so on on Elven animal cages.