So I may explain this poorly but I'm going to try.

Is there a way to add, say for premium users, a way for one user to set an "option" on another so that the first is given some type of a prompt (similar to the vacation or warning prompts) when they look at a user's profile they have flagged?

Ex: How to flag someone previously traded with as "dont trade with again"?

Yep, the "friends" system definitely needs some love and updates. Looking at it soon.