> 1. It would stop people misusing it to italicize titles where nothing
** is cited. Example:

My impression is that the origins of cite were to cover those cases
that are conventially italicised in typeset material.  If something
like that ceases to be in the browser's default style sheet, I think
you will need a new element to cover the case, or you will be forced
to span everything.

Where it is inappropriate, you can sub-class cite to cancel the styling.

Note, I cannot really see XHTML 2 being adopted by people who code
for rendering.  They would be much better off staying with HTML 4.01.