Player isolation generally starts when you no longer have to travel in game. You saw this a lot in wow. Sit in Org or SW and just queue for dungeons. Its the same for most MMOs. What I mean to avoid with instanced housing is making your house 'the hub' - as in your private residence can accomplish everything that can be done in a city. I think MBs in housing actually do demonstrate some of this for two reasons - Housing 'worth' for a lot of buyers takes into account how far their residence is from a MB and that yes, I think it has decreased traffic from cities though maybe its not as noticable due to housing capacity. I mentioned in another thread that Sarg has 12k people averagely active, with only 1260 plots of housing. Thats only 10% of hte player pop. As a personal anecdote - among all the poeple I know who own a house, almost all of htem use MBs near their residence followed by Limsa's MBs since its right there at the aetheryte.
If they wanted to turn housing into hubs while doing the instanced thing, the earlier proposal would probably be the path to take: Make a central market area where Vendors, NPCs, and MBs are literally circled around a central Aetheryte you teleport to. I guess what you want to do is encourage some kind of 'town square' in some capacity - Either at cities, or in housing districts.