And some places even run smaller buses. Here in the DC area, we have articulated buses, standard ones, and even smaller ones—about 60 percent of the size of a standard bus. It's rare to get the ideal size at the right time in an area of such bad traffic, but they do make an attempt.
In the small city I live in, we have small buses, which is sized right for the ridership. Unfortunately their top speed is about 26MPH on level ground and My commute includes a steep freeway overpass, which that drops to about 18MPH. The speed limit on that stretch of road is 25MPH and most traffic goes about 35MPH on the overpass as there is nowhere for a speed trap to be set. I can tell from 4 blocks away when one of those buses has been there recently.
London used to have them. It was sort of amusing watching them trying to navigate the tight corners and narrow streets. But very scary to be near them on a bike.
Running buses more frequently has its own problems. When a bus is running slightly further from the one in front than it should, it has to stop more often for passengers, and those passengers take longer to buy their tickets, which makes the bus run even later. This is a positive feedback loop that is made worse when buses are more frequent. I have certainly seen a set of four buses coming as a convoy on a route that is meant to have them every 12 minutes.
The solution is to either run fewer bigger buses, or to inject a whole load of negative feedback into the system, either by having buses wait for a minute at a few stops until their scheduled departure time (which involves making the route slower) or by real time tracking with radioed instructions to the drivers, like they do on some underground train systems.
If you're going to give it its own lane anyway you might as well make a proper tram (which will have higher capacity and a smoother ride for passengers).
In Buenos Aires, there are bus lanes on some major avenues. That means buses are on bus lanes some of the time but not all of the time. A tram can't do that.
The problem is not whether cars can enter the exclusive lane. The bus need to be able to get out of the lane unless the lanes go everywhere the bus may want to go. Having tram lines go everywhere can be prohibitively expensive. Building exclusive lanes in major avenues used by lots of buses is cheaper and can improve travel times a lot.
Buenos Aires used to have a tram, actually. In the nineties you could still see the rails, on the road as you describe. But buses replaced them in forties because as the city grew the ability to change where public transport could go proved to be very valuable.
Tram lines are expensive, and require that the city (population, economic, and social centers) remain largely static. If you predict wrong, you can end up spending millions on a tram line that doesn't get used.
Every bus you run requires a qualified employee to drive it, and putting them on for only an hour or two per shift would make it even more expensive (what employee would want to work such minor shifts?)
