> Another option that gets rid of the need for an encapsulation option might
> be to explicitly state which term a definition is referring by using an
> element's id... maybe something like this: 

I don't like that.  I think it could be abused.  As far as I can see, the
only reason for having to do this with label elements is that they are
intended for presentational markup, in which structurally related items
are actually separated to get the right layout.