Something similar could be done for New Orleans, but it may be better in the long run to look at downsizing it and letting the lowest lying areas become open space and wetlands.

I agree. I seriously doubt whether insurers will be willing to cover the risk of something like this happening again, especially since one of the levees that blew out (the 17th Street Levee)had just finished its upgrading (http://www.captainsquartersblog.com/mt/archives/005362.php). (Original quote from the NY Times.)