Modern ERTMS involves the system knowing where all the vehicles are; a centralized system will be more efficient than a distributed one if all the information is available. I don't think that's a fair characterization of British train disasters; the only one I can think of that involved a signalling failure is the Clapham Junction crash, in which the wires were connected wrong - and connecting the wires wrong will break any system.
A vehicle the size of an 800-person tube train wouldn't be able to get round the tube corners without rails, and how could you negotiate a destination that made sense for that many people?
I'm convinced this can be made safer than central signalling.
As for the vehicle sizes, I'm sure whatever size vehicle is necessary could simply be constructed, and the article on wikipedia for mentions that you could have battery-powered vehicles with rapid charging at stations, negating the cost of having and maintaining dynamic (moving ?) electricity connections throughout the tunnels.