Your ideas would probably work (although I don't think it's the most efficient way to go about it), but it would never ever be implemented. The idea of giant prizes paid for the govt (or rich people/companies) is a good idea (like the X-prize). I'd like to see more of it and I think we'll see more in the future. CAFE standards will probably be raised again. It's a hamfisted approach and I don't normally like the govt putting it's hand in the market, but if it gets selfish pricks out of giant SUVs, it can't be all bad. I think it would be easier (and make more sense Constitutionally) to just require vehicles over a certain weight to require a separate, more expensive and much harder to get license.
There is a reason all small cars don't get 50mpg, Americans don't want them. GM/Chevy/Geo/Suzuki sold a 50mpg car from 1985-2001 (the Sprint/Metro) and few bought them. One of the main reasons hybrids have sold so well is that a lot of people just want to say they own a hybrid (well that and the car manufacturers losing 10s of thousands of dollars on every one they sell). Making gas cost more is going to be a huge push in the right direction, which is why I think the market will take care of it. We certainly have the ability to make a car that gets 50 (or 80) mpg, they just don't accelerate very quickly, don't handle very well and they ride hard. (although they accelerate quicker and handle better than regular cars did just 30 years ago) American's atittudes on small cars are going to have to change. Me personally, I LOVE small cars and always have. The Mazda3 I currently drive is the biggest car I've ever purchased (and I've purchased a lot of cars).
As for Mass Transit: I think we will see a rise of it in the next quarter of a century. It's going to be hard to convince people in new cities that they'll get a BART (San Fran's Mass Transit, it's well liked, but WAY under budget) and not a MARTA (Atlanta's, it's hated and WAY under budget).
Hmmm... I just hope with new technology, mid-sized cars will have better millage. I think the goal of the auto industry should be to have a 45mpg 200 horsepower midsized car for under 30000 by 2020.
