Someone already mentioned it, but I think it bears repeating, What about the possibility of establishing a Bus Rapid Transit line on some of the key thoroughfares, especially those that could link several L lines together.
New York City is in the process of establishing a new BRT line in each of the five boroughs. I believe it is supposed to commence operation in Fall, 2007. The URL for the project is as follows:
http://www.mta.info/mta/planning/brt/index.html
It will provide a dedicated bus lane, priority signaling, and limited stops for the five BRT lines.
My thought is that the CTA/RTA could experiment by establishing two north/south and two east/west routes. It would work similar to the proposed Circle Line, but much further away from the downtown area.
A Western Ave. route could link the Orange, Cermak Blue, Forest Park Blue, O'Hare Blue, and Brown Lines.
A Cicero Ave. route could link the Orange, Cermak Blue/Pink, Forest Park Blue, Green, O'Hare Blue, and the Metra UPNW.
An Irving Park route could link the Red, Brown, O'Hare Blue, and the Metra UPNW.
A Garfield route could link the Metra Electric, Green, Red, and Orange Lines.
All four of these routes already have Express routes during the rush hour, but the advantage of an Express is negated if it needs to slog through the same traffic as everyone else.
As far as pollution is concerned, I agree with Marcu that the pollution is merely moved elsewhere. Plus the cost of re-establishing the infrastructure for the overhead lines may prove to be too costly. But there are alternatives.
The city took delivery of 10 Diesel-Electric hybrids last year, and are slated for another ten more this year. A paltry sum, to be sure. But it is a start. These New Flyer DE40LF buses are not non-polluting, but they are a vast improvement over a standard diesel, both in terms of fuel used and emissions exhausted.
When other alternative, even cleaner bus technologies are perfected and made available at competitive prices, the diesel/electric hybrids could be replaced in much the same manner that the CTA replaces buses now.
Another thing that buses do provide over a rail-based system is flexibility. If the transit needs of the city change for whatever reason, a BRT lane could be easily changed back over for automotive use, with a minimum cost. A new BRT route could be established fairly quickly, provided a thoroughfare was able to provide the requisite dedicated BRT lane.
I know it isn't an ideal solution, and a bus doesn't have the same cache as streetcar or trolley, but I do believe it provides the best solution, given the city's infrastructure and financial handicaps.