There are several variations of this picture around. I think it's way more effective than the graphic (though we do need to add a picture with a light rail configuration) and the smart growth advocates have been using them for years.

What am I missing?

There have been some recent articles about articulated "street car / buses" being developed.
They have the advantages of running on rail in less congested areas and on roads other times plus a low first cost. They seem like a more practical step to serving the majority of the country. My gut tells me they seem more sustainable too. Could be more easily feasible for communities without huge programs and regulations maybe? They seem more scaled to the population densities of the western grid cities and towns. The reduced carbon and energy of these smaller systems might help to subsidized the collosal systems and restructure the automotive sector.

Cost per mile of rail systems in relation to the numbers served are staggerring. They work best in areas of very concentrated population. Stations need to separated by distances as they are expensive. They need collector lines of other transport and parking structures for commuter cars. They need to be carefully located so that they actually tie housing areas to working and retail areas.

I drove into Philly yesterday (because all the trains were sold out, which is a good thing), and something struck me: We're having the same problem with cars at the beginning of this century as we had with horses at the beginning of the last century. They're clogging the streets, presenting a health hazard, and are unsustainable using our present system.

Those figures disagree radically with http://www.publicpurpose.com/ut-fwylrt-2004.htm

Is it because existing light rail systems operate at a tiny fraction of capacity?

Busses look like the big winner in any case -- nearly as high theoretical capacity as rail, cheap, flexible, and they serve routes poor people need.

People need to get over the stigma against buses as transportation for the 'poor people'. This is the only practical way for public transportation to work in places like Los Angeles. Combined with a couple light rail routes from outlying areas (Inland Empire, High desert, etc..) it would be cheap and efficient, but with our current stigma out here no one would ride them.

This isn't mentioning the sick fascination with a single person driving and SUV to work every day that is in place here too.

Trains and bikes are indeed far more efficient uses of public ways. One big problem for bicycle traffic is that there are discriminatory laws, in most of the US at least, that limit bicycles to no more than two abreast. But you can safely fit a heck of a lot more than two bicycles in one lane width! So, for most efficient use of roads, we've got to repeal those arcane laws an let vehicles take up as little space as they need.

And as for trains, all we need to do is to take over the leftmost (in the US) lane of expressways and superhighways for train tracks. Stops with pedestrian overpasses could be fairly easily retrofitted into the on/off ramps at exits or at bridges.

Another problem with bikes is weather. Where I live, I'm lucky to get 150 days a year where biking is possible either because it's too hot, too cold, or raining.

Icelander, weather isn't a problem for biking, clothing is! As they say there is no bad weather, only bad clothes. If you can walk (or ski or swim!) in it you can bike in it :-)

And if you aren't willing to let a little weather get on you when you bike, you can invest in a fully faired pedal powered vehicle, which will get you going superfast, and keep you inside at the same time. Though it may be a bit of the expensive side if you don't want to build it yourself!