You're also underselling the intersections part, because getting traffic to intermix at intersections is incredibly easy at 20mph. And, what you've conceptually

You're also underselling the intersections part, because getting traffic to intermix at intersections is incredibly easy at 20mph. And, what you've conceptually stated (no loss in capacity) has been empirically demonstrated. Finally, you get vastly different places at 40 mph vs 20mph. At 20, roads are smaller, people can safely exist close to the roadway and even enjoy themselves, and you don't need huge buffer zones for the safety of drivers or people. All these things compound to put people (willingly) in closer proximity to one another, so that, while peak travel speed is lower, traffic throughput stays relatively consistent, and travel times decrease overall because many long trips get replaced with short ones.