Yes, some relatively slow, difficult, and expensive attacks would of course still be viable. That does not mean that, "it wouldn't change anything in practice."
> escalation through residential connections, existing international botnets
Right—so how are you going to talk to your botnet from outside the target sub-Internet when it won't even route packets you send it, except maybe to some hardened commerce-and-propaganda-only subnet that may have limited or no connection to the rest of the target state/bloc's Internet (and again, even that part existing is a maybe)?
I don't believe a complete separation would ever be possible. We'd have to put banks on the commerce side. But that means every single business entity would also have to have access to them. But most businesses also need access to the other side and will not do perfect separation.
In malware research labs you can find rooms literally painted in two colours to separate the isolated part and prevent joining networks by accident. Normal companies do not care that much. Most single-person entities will just plug both ends into one computer and go on with their life.
Two things that are surprising me in this thread: 1) "there are ways to work around this, so it's completely useless" (yes, that's... any security), and 2) either not a lot of people are paying attention to future-Internet development, as in actual, technical development and research, or they're not seeing what I'm seeing in them, somehow, as, for example:
Even if you physically firewalled every connection into a country all it takes is one little node connected via RF (satellite, HF, etc) dropped near an open WiFi hotspot.
There is nothing that guarantees the Internet will keep working the way it does now, and if an open Internet causes enough problems, it will be reigned in. How it works now is a choice, not a law of nature. I'm not happy about it, but that's just how it is. Either these kinds of attacks won't get much worse, or they'll get a lot worse and something like that will be what happens.