Of course Musk understands that this problem is hard. That's why there are not already hundreds of tunnels under cities when it is the obvious solution to the current problem with our wheel based, point-to-point transportation system. He has the ability and funds to gather and inspire the best-of-the-best to maybe make real progress on this problem. Check out the one minute Boring Company promo video[1] for some preliminarily ideas for solving some of your above issues. 1. On street elevators to interface with tunnels. 2. Electric carts to eliminate combustion in the tunnels. Much less ventilation needed. 3. Once below a certain depth there are few things to avoid. See 1 for why this is might be possible. 4. See 3.

It is easy to speculate on why something might not work. Most of the universe consists of nothing (by volume) or a random assortment of very fast moving hydrogen and helium ions (by mass) (not sure where black holes fit in). Interesting things are rare. They are very complex systems that have built-up and evolved over time. If you want to try and build such a system, a good way is to look at the problem from a fundamental physics and economic view (first principles, as Musk would say) to see if it is possible. If it is, then start thinking about it seriously, gather like-minded people, and start building things. It's impossible to plan all the necessary steps before starting a journey that never been done before.

[1]https://www.youtube.com/watch?v=u5V_VzRrSBI