I have encountered such a system in Pulheim, near Cologne, which predates 2007. It only applies to the main street and gives it a much more open feel. It seems to work well but, as a pedestrian, does take a while to get used to. A street in the town where I live, which separates two large shopping centres, one of which is only partially developed has been set up in a similar way but the council are trying to make it pedestrianised in future, although bus companies are resisting.
Would such a system work over a larger area in the UK? Not judging by the way in which many youngsters drive.