I agree. I don't understand this reluctance to do so. I think it has a lot to do with good old british resistance to change and sticking blindly to some ridiculous traditions (2 taps in the sink I'm looking at you)
Higher residential density wouldn't add that much strain---the destinations (ie workplaces) still have the same density, it's just that commuters don't travel as far on the tube.
So you could make the system more intense, and less extense; concentrate the investments in tube upgrades on the centres.
