Jan Heine's blog post makes an interesting suggestion- converting some streets into bike boulevards, where cars are not allowed. Chicago's grid layout would be ideal for this since only a few streets would need to be converted to effectively increase usage. I'm guessing the cost to block streets from cars might be less than creating all new separated bike lanes.
I can see that point, but I think if the streets are chosen carefully, residential street impact could be minimal. Also, I would consider such access from my house as great, and I'm sure there are others who would look at it favorably. I want to live there.