I played a LOT of MULE on Atari 800 with 4 human players, and collusion is a critical and fun element of the game. Could it result in hurt feelings? Perhaps, but it also allows a player with a monopoly on a resource to maximize their profit, try to maintain a majority resource position, etc. I've been in many games where 2 players collude and later collude with others - it's not been my experience that it results in 2 players "dominating the game" against others. If you have concerns about misuse, make it an option during game setup.
I appreciate people providing feedback on this matter. I have been convinced that it is worth bringing back into the game. I am something of a hypocrite to think I can withhold the feature while purporting to provide classic MULE. I had settled towards making it an off by default option, but perhaps it should be on by default but optionally disabled.