The minor problem with your plan is that the East Side IRT is pretty much near capacity, the M15 bus is already handling more riders than a bus line can do effectively, and similar conditions apply on the third/lexington and fifth/madison avenue bus lines. The Upper East Side originally had three rapid transit lines, and now it has only one. The Second Avenue Subway is necessary, and if that can't be built quickly thanks to the incompetence of the MTA and the greed of the various construction industries, then some other alternatives have to be found, perhaps streetcar lines on First and Third avenues. Streetcars have an advantage in being able to be coupled in trains with double or possibly even triple the capacity of an articulated bus. That and they're faster and provide a better ride while making less noise. Plus, people are more likely to switch from subway to streetcar than to bus.
Mass transit capacity is set to boom on the Upper East Side. With BRT coming in late 2007 or early 2008, the over crowding should be greatly mitigated (if done correctly) and then in 2012-13 the Second Ave Subway link from 96th to 63rd starts service it should create the same balance that exists on the West side. And yes potentially streetcars could be added.
Right now, the M15 limited runs every 5 minutes at peak, and the local also runs about every 4 minutes. The problem at such headways is reliability, since any delay will cause result in more people, and thus more delay, at subsequent stops, until you get 5 buses running in a pack. BRT will help mostly by making running time more predictable, if the separated lanes are done properly. And off-board fare collection, if they ever implement it, will allow for much faster boarding, also improving running time significantly. But how much can you increase capacity on a bus line? 25% maybe. And that's still nothing compared to the capacity of a subway line. But even the Second Avenue line will have rather limited capacity, since it will only have a local train, and even that will initially have to share the Broadway express tracks. So the subway capacity can only be improved by about 25% as well. And that's assuming they build the thing at all, which they haven't started doing yet, and it's far from certain that they ever will. After all, they've been promising that subway for at least 50 years.

more than 25%. Remember that the BRT trains are almost 2x the size of the IRT trains, and consequently hold about 2x as many people.
An IRT train is 510 feet long, a BMT train is 600 feet long. The IRT trains are 8'9" wide, the BMT trains are an even 10 feet. The difference in area is about 33%. So the total capacity increase will be something like 33% instead of 25%. Not that huge a difference. The main problem is that they're building only two tracks on Second Avenue, and that the service on those two tracks will have to share the Broadway express for a long while.