As an asthmatic I can confirm that air quality in London is awful. I live in the countryside and commute into many cities, but in London the air once I am down form more than 24 hours has me reaching for an inhaler, where anywhere else I don't and at home I never need it these days. Of course if you don't suffer from such an issue or are of a younger age then you will be fairly oblivious, even more so if it's all you know, but it doesn't change the fact. It's like all those chair threads recommending crap chairs like the Markus. It's when you have a bad back you notice a crap chair. If you don't have a bad back you won't notice it, but it doesn't change the fact it's still a crap chair.
Too many cars in London, too many taxis, too many busses and it needs fixing. For me the city (square mile) should be car free, taxi free and bus free. Make it fully pedestrianised and create points of entry and exit that mean drop offs are easy. There is enough money in the city to make it workable, weather resistant and better.
You're being to generous. Everywhere inside Zone 1 would be ideal, although I realise that would cover a significant number of residential streets as well. Swap the buses over to electric and ban Taxis and it would be ideal. There is very little reason to need to drive in Zone 1.