[steam for ever]

Passing loops seem to be the right way to go. Look at the Altrincham line, it used to be four tracks to it would require little work to install here.
Using parking spaces will discourage the use of cars in the city.

They work in other places obviously proven is some of the pics I provided to there is not any real reason why ir should not work.
With signalling improvements you can have a higher frequnecy of trams.
One option is to link a freight and passenger tram and detach them when needed.