Circling is fine! They won't get anything new in THEIR activity feeds, so it shouldn't affect them at all -- they just get the pleasure of seeing you're following their interests. And if they don't like that, they can change their settings so you can't see what they favorite anyway.
On the other hand, CONVO'ing someone to tell them you're circling them, or to thank them for circling you, is against Etsy's TOU and considered spam.
But I circle customers all the time, along with people who favorite something of mine, or anyone whose taste I enjoy...that's what it's for! : )