[the phantom]

What could have been done?

Aren't what-ifs fun?

pre-emptive strikes?

That would certainly be the smart way to go, if you could catch Saruman by surprise the way the Ents did and get it over with quick. A siege certainly isn't an option in my mind, because you can't spare the troops and time for a siege with Sauron sitting across the Anduin. No no, if possible you'd want to land a crushing blow to Saruman with no warning and turn your attention back to Mordor as quickly as possible.

'live and let live' till attacks start?

You mean ignore Saruman until he attacks? Definitely not. Getting Rohan to ignore Saruman was Grima's whole job. Saruman wanted to be left alone while he built up.

negotiate?

Well, I suppose that might be the option that all the hopeful unrealistic people would recommend. Yes indeed, in their silly little minds talking/bargaining/negotiating/pacifying always makes things better. But arguing against them would be every person who has ever dealt with Morgoth, Sauron, Glaurung, and other such delightful individuals.

I'm thinking Elrond and the others would be intelligent enough not to negotiate. You'll notice that Gandalf talked terms with Saruman after he smashed his army and had him trapped. It wasn't really a negotiation. It was mercy to an already defeated opponent.