This is why I believe the IOC needs to discuss their position and demand that affiliated sports federation follow their rules if they want to be part of the Olympics.
Either the IOC accepts Macau, Faroe Islands, Tahiti, Gibraltar, New Caledonia and other few territories, or they end support altogether for dependent territories such as Aruba, Puerto Rico, Hong Kong, American Samoa, Guam and a few others. It bothers me to see swimmers from the Faroe Islands competing at the World Championships, or Tahiti at FIFA events, but when it comes to the Olympics the international federations suddenly pretend these territories do not exist.
Great Britain's situation also bothers me a little. I don't care what sort of political scheme they got themselves into: if you are going to send four, five football teams to compete at the FIFA World Cup -- an event nearly as important as the Olympics -- have the balls to compete independently at the Olympics as well.
Then there's the case of Taiwan, Palestine and Kosovo. Palestine is an UN observer, so they should not be bothered. If we use the limited recognition bullshit, then we should reconsider allowing other states with limited recognition as well, including Israel, since the state is not recognized by other 31 UN members. The Kosovo situation is still a mess, and the IOC has jumped the gun by allowing them to compete, in my opinion. Taiwan is, well, a mess that was more or less sorted out, but now they want to open the can of worms again. It makes a lot more sense, historically, for them to ask for recognition than, say, Hong Kong, but it's still weird. I would leave things as they are, but if Taiwan is gone (for good) from the Olympics, I would not be sad and, in this case, I would still call for other territories to get the chop as well.