Is there a way to prevent a sales order from entering the fulfillment queue but still allowing it to be approved and allocated? I am not seeing a status I can exploit with a workflow.

Short answer no. Longer answer you might be able to prevent fulfillment with a return user error unless created from has a checkbox marked. However it will still show up to be picked in print picking ticket page.

Thank you! That's basically what I've done, plus added a checkbox that they can filter against in the bulk fulfillment tool.