ETCS level 2 can increase rail capacity by orders of magnitude without laying any new track. You can have multiple trains following each other separated by stopping distance instead of having to separate trains between trackside signals.

I don't think so, faster trains are overtaking slower trains. There is simply not enough space between the station to overtake without having an acceleration that would damage the trains or the tracks. For example in western switzerland the maximal train speed for the fastest trains are ~130 Km/h while the same train can go up to 200 in some swiss-german part, only due to more congestion on the western part. Trains cannot be bigger, some of them are already too big for the smaller train station and in case of rerouting / unexpected stop this causes issue. You cannot make them higher too.

You could get ride of the smaller train , only allowing big city to survive or decrease the commodity traffic or increase the rail network or increase the train station (more tracks allowing to overtake there, and have bigger trains) There is no easy solution otherwise it would have been done.

Not really, the reality is that in some places Switzerland doesn't use ETCS 2 because it limits our system because ours is better.

I think you mean ETCS Level 3.

But that's just one of many investments that could be made.