Mike, That is one hell of a loop. Living in the east of the city will be a long way around, either way, to get to the centre.
The 1960s idea was similar, and was to be built. The Northern Line from Sandhills through the centre to Gatacre. From there around the loop, via Childwall, Broad Green, Anfield, Walton and join back before Sandhills (the Canada Dock branch. Like yours a long way around from the east.
The Edge Hill Spur was supposed to cut this loop into two - a north end loop and a south end loop. From Broad Green to Edge Hill, down the Wapping Tunnel with a branch off this to Central stn. Two loops could be in operation.
As the Line from Gatacre to Broad Green is now a linear Park installing rails again maybe out of the question - although not completely. This leaves the north end loop, which LFC want reinstated. However it would only go as far as Edge Hill - maybe Lime St main line if 3rd rail is installed. So you could have a line from South Parkway to the centre, around the loop via Vauxhall, Walton, Anfield, Broad Green then into Edge Hill/Lime St.
The Edge Hill Spur using the Wapping tunnel, with maybe a station at Catherine St would be essential here to get outlying people to the main districts in the centre: business and shopping.
Then the Circle Line using the Waterloo tunnel would complete the the main Liverpool system. Of course the Burscough curve would enhance (also creating a loop: Kirkdale - Ormskirk - Southport - Kirkdale), as would the Bidston to Wrexham link, bringing people in from North Wales right into the main centre districts.
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