The problem in Lincoln (since GNR days in the mid-late 19th century) has always been the interface between rail and road/pedestrians, not the capacity of the track layout to handle extra volume. The High Street crossing problem has been partially solved by removing road traffic altogether and installing a new footbridge, although this doesn't seem to be universally popular and has already had minor structural deficiencies to sort out. The crossing at Brayford Wharf East has been made one-way and there's a long-running scheme to install a further footbridge, but this has once again been rejected because it didn't make provision for disabled users. The proximity of the Witham at this point, doesn't make planning or construction straightforward either.
A final crossing that doesn't get mentioned very often is the one at Great Northern Terrace - this serves a large number of businesses, including the main bus depot for the area, and since the increase in freight on the Joint Line, it's having to close far more frequently (and for longer than before). I can see this becoming a major bone of contention between the railway and the businesses affected before much longer...
The avoiding line 'avoided' all of these issues, and I would say the loss of it IS actually quite a big deal still