I feel like this this project will eventually morph into an undersized subway.
It's not. The tunnels generally account for at best 1/3 the cost of a subway project, and even then, the cost of the tunnel that's variable per diameter is an even smaller fraction (since you're sticking a lot of other stuff in the tunnels). The big money sinks tend to be the underground stations. Overall, moving to a smaller diameter tunnel might save you around 10%, and you'd probably eat up much of those savings with rolling stock incompatibility issues.