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Originally Posted by Legate of Amon Lanc
But the part you quote only means, or at least I take it like that, that Sauron knew there was something strange going on there. It could have been a great Elf lord, or Gandalf who was spying in Mordor.
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Hm, I would say that Sauron would be able to differentiate between an Elf Lord/Gandalf and the One Ring, with which he had a special relation. I don't think he was able to spot elves or istari by pure subtle perception, from miles away, but given the episode of Frodo at the Amon Lhaw, he was capable of perceiving the worn Ring from a far greater distance.
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But Saruman was with Elrond and Galadriel probably only during the White Council meetings, let's say once in fifty or hundred years, and he didn't know whether the bearers are Elrond and Galadriel or Glorfindel and Celeborn or someone else in their houses.
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I would guess that, given the importance of their coalition, the elves did not keep their secrets concerning the rings from Saruman, esspecially considering his developing interest in them. As for the taboo about them, I believe it applies only to those outside the White Council.