"I've thought about this. My thought has been, bump the street level up one story to create a pedestrian / bicycle promenade and move building entrances to the second floor."
This (sort of) already exists in Minneapolis (and to a much smaller extent, St. Paul and Duluth) courtesy of the skyway system.[1]
It's very well done and has created a completely separate urban ecosystem overlaid on top of the existing, street level, downtown.