Why not use dead the Michonne way (hands & teeth removed), plus guts for smell repulsion?

As Jenayah mentions in a comment, there is a group of people in the comics who make use of the dead:

They are called the Whisperers and they live among a herd using the (tanned!) skins of the dead to disguise themselves. They have to be careful with their body language and noises or the dead will notice them. They are also foragers rather than farmers and rely on the movement of their herd to feed themselves. And their social structure and values are somewhat questionable.

Negan uses the dead as a sort of perimeter defence at the Sanctuary. But these are firmly tethered and/or penned in, and more of a defence against humans than a zombie deterrent.

But that aside, it is clear from previous episodes that it is infection and bacteria that kill people who are bitten. Everyone is already "infected" in that everyone resurrects, regardless of how they died. People who are bitten or injured by the dead can survive if the infected part is amputated soon enough, hence the positioning of some bites (like Karl's - that couldn't be amputated). From that, it's clear that having corpses or parts of corpses around is an infection risk in a world that is running low on antibiotics and medicine. Any open wound poses enough risk without having mobile infectious units in your village.

It's not so much that they haven't thought of it, just that they're "not there yet". They can live within walls and direct herds away from their dwellings, plus the dead get more decayed with every passing season. In theory, it's only a matter of time before the dead are no longer the main problem.