The real problem is packing large numbers of people in a big warehouse, regardless of walls. I think the best solution is having a small number of people working on the same project share an office. There should be numerous small conference rooms for when maximum concentration is required.
Traditional design may be better for health, but it destroys collaboration. IMHO the best office design I've ever been in were simple team rooms - everyone on a team (or sub-team) would work in a large office that they can tailor the way they like (lighting, decor, etc). This really helped build team cohesion, and since everyone is just a shout away it broke down the walls preventing collaboration.
And I suppose it has the added benefit of only getting one team sick at a time :)
It really depends on the type of work you're doing. For jobs that require a lot of collaboration, open areas holding around 10 people can be good. Some jobs would benefit more from having offices that hold 2-3 people each, and for jobs that require you to be on the phone a lot (sales, marketing, support, etc.) private offices really are a better option.
The real problem is packing large numbers of people in a big warehouse, regardless of walls. I think the best solution is having a small number of people working on the same project share an office. There should be numerous small conference rooms for when maximum concentration is required.