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Oh come on now... people loved the El Camino! ;-)
Cul-de-sac's to increase connectively (something you never prove in your post) among the neighbors on the cul-de-sac. While the streets are less connected, neighbors tend to be closer on cul-de-sac's especially if there are families with children.
On its face, it seems to be a pretty convincing argument. Here is my thinking about why it is illegal, and perhaps, why there is a legitimate societal benefit for continuing to keep it illegal (even in a Libertarian world)... or at least modify it but keep it... The thing that people are often times blackmailed regarding are crimes that have been broken (though it appears that Letterman broke no law). Blackmailing someone over a crime they have committed essentially creates a justice system outside of the one that we have created in our society, and is harmful. I would suggest that the definition of blackmail should require that the thing being blackmailed over is a broken law.