Well I live in Palma de Mallorca (Balearic Islands) but work from Madrid. I've give up in living in Madrid because I can´t stand the fact that anything you do needs a 30 min by car or subway minimum. I've also lived in Barcelona and other small cities like Salamanca that would be a better example of a walking city.

I have chosen to commute a 1 hour plane to work (I work in 3-4 days spans and then several days off, so it´s doable) because I rather go walking everywhere, or if I have to take a car, it only takes 3 min to get there.

- More dense cities are more pleasant to live.
- More slow paced live.
- You meet people you know all the time (you don´t stop to talk to unknown people usually), which is nice and necessary. We are social animals after all.
- You usually end knowing most neighbor businesses owners and clerks, also you also get to know other neighbors around your street.
- It´s very productive, you can get most stuff done in 15 min tops.

But to do it from scratch there are certain parts that you mention that must be taken in to account.

- You need green parks than old medieval cities, they must be a central part of the planning. They give air, and the much needed green surroundings we need. They also help giving more luminosity to the city. Old cities were that tight because they needed to be inside walls for protection, that´s not the case any more, and density it´s not such a priority anymore.
- You MUST limit the size of the city. Above 200k and 300k residents, it starts growing too much and expanding to levels where you need mayor infrastructure to handle the volume of people getting to popular locations. The effect of a small city is lost (or at least you start loosing it). It would be better to build a group or constellation, of small cities connected by train, and surrounded by parks and industrial zones.
- Parking is a mayor problem, you can deal with it, if you plan for big parkings outside the city and good public transport, and mandatory parking below the buildings (if you are starting from scratch, in Barcelona is impossible). Also if it´s well planed a lot of people don´t need to own a car.
-Sunlight is a problem for row housing, but if they are well designed and oriented ( for example if you have a narrow street at the front, you get a big patio), with interior patios and attics, you can get a very nice urban landscape (with terrace gardens included) for the upper floors, and the patio to the lower ones. Patios are a central part of some urban Mediterranean cities, most live was lived facing to them.
-Bikes are better channeled to more central and wide streets, and only allowed to go to the narrow ones to get to the destination (going slow at that parts). This is something that small cities like Ferrara (Italy) have pretty much nailed, but others like Palma de Mallorca are slowly iterating to solve.

Living in a small city makes you change the way you live, it´s a different mentality, sometimes people from Madrid or Barcelona get shocked by the change and can't handle it. Their usual complains are:

-I can't get all the options I got on my big city (theaters, museums, events, parties, etc..). Well this is true, but the fact is that when asked this people usually don´t go out of their neighborhoods, and rarely go to the theater or museums. You can have the same rate of Museum visits, going as a tourist once a year.
-People is more nosy and opinionated about your live. Well this is true, and can be difficult to adapt for city or suburb people. But I´ve noticed that most internet social apps are designed to replicate this nosy live. We are social beings, and when you live isolated in a suburb home, you still need to be in contact with people.

At the end it´s very very pleasant to go to buy bread and start talking with one neighbor or a friend for 10 min (if you want of course, you can always go your way saying hello). Even now a day it´s much individualistic than it used to be. My grandmother used to tell me how they all knew each other, not only in their street, but in their neighborhood. This happened when everybody had problems to get food or money, and people had to help and get help in a daily basis.

We need people around and small cities give a nice compromise between the small tribe that we evolved in and the big community where everything it´s possible. Every time I read comments at HN about social Apps(to get new contacts) or being a loner, or an introvert, I see that those are problems that are seem to be much smaller here in southern Europe. Here hardcore introverts still exist, but they seem to be more scarce, and people use social apps a lot, but they still see each other in a weekly or daily basis (that is, when living in the same city). Dating apps are used, but you still can go out, and meet people you know that will introduce you to new people.