BlitzkreigComin:
LoL, sounds to me like a good tower rusher would walk all over you!
A good tower rusher starts away from your town, and brings a few axers or at least armored clubbers for backup. If you see villies building a tower, there's probably at least 3-4 towers behind it. Since he's mining stone anyway, his own tower is probably towered as much as yours. It's a big investment, so he's counting on doing even greater damage to you than the resources he wasted. Let's dissect your solutions:
1. "Towers take time to build so if you ever see villas stake out a tower near your camp... bone them to death." - Whichever villies you send to do the boning are walking right into the biggest trap they'll ever see. The 2nd row of towers and the axers/clubbers will rip them apart before they can do any damage. The tower builders will go behind their support to avoid being killed, if the tower was barely started then it gets canceled to recycle almost all the stone, if not then you won't bone much for the villies you lose.
2. "If by chance they get a tower up, a few slingers will make quick work of a single watch tower." - A few slingers would indeed make short work of a watch tower, if it weren't for axers/clubbers. This still has a chance, but I've seen it fail (from both sides).
3. "Worst case scenerio is to simply take 8-10 of your woodies and bone the tower into ashes quickly." - That is indeed the worst case scenario, since you'll probably lost all of those villies and maybe, just maybe, you'll kill 150 stone (or 75s vs roman!) for your trouble.
4. (snip) "Retaliate quickly by attacking their camp." - As I mentioned earlier, since they're mining stone anyway (1 or 2 towers is useless), if they're smart they'll probably tower their own town too. If you attack their camp, be sure to make it a large army of slingers and/or axers, which are capable of taking down towers. More about this later in this post.
5. "The worst thing that you can do is nothing at all." - Quite right, standing there awaiting your fate won't help.
6. "Tower rushes are hard to pull off if you are constantly watching your base." - Not really. They're risky because of the large investment, but watching your base has little to do with it.
Now, I think the best solution is the following: First send a single villager to recon the towering area, to see if it's a rookie building a lone tower. If it's the case, type 19 in the chat window a few times while your villies bone his tower down. If not, quietly sneak your villies out the back (as in *not* through his towers, and try not to let him see the exodus). That's right, chicken out, letting him waste more stone towering up your town. Rebuild somewhere not too far away (maybe 50 tiles) and tool rush... his ally! A good tower rush is meant to weaken both you and your ally, so *his* ally can deal the killing blow with a quick bronze. By taking out his ally, you destroy his future, since with all that stone mining (especially if he was still towering up your town through all this, lol) he'll be stuck in tool age for a while; you and your ally can bronze relatively fast if you relocate.
While relocating may seem like a big cost, when compared to the mountains of stone and build time (which usually means an earlier tool with a smaller econ) required to build all those towers, it's not that much. If he persists despite his ally dying and you bronzing, you can come back with a horde of slingers (with logistics of course) if you're in a sadistic mood.
Hope this helps.