Well, I object to path-finding on a more fundamental level: We shouldn't try to play the game for the player. That will come back to bite us whenever we try to make the game more interesting. Scenarios with deep chasms or lava pools are just one example.

I understand that the mouse isn't really perfect for objects that have very limited reach like the axe. We could try to change the mouse cursor or display a symbol in order to show that the axe when swung in the given direction would actually end up chopping a tree. After all, I feel we are using the mouse in the Soldat way: What you click on doesn't matter, only direction (and possibly distance) really matters. Maybe we could reinforce that in the interface somehow?

Oh yeah, and the obvious change here is to increase the interaction region for trees. I don't see a reason why it should have to be fiddly, realism be damned.