Yeah but we're not *JUST* talking about rush hour, if we're talking about a wholistic Transit solution then the fact that half the seats will disappear is relevant to the offpeak ridership as well, or are we improving off peak service in the hopes no one will ride the train. Also I bring up the people factor because---as they are wont to tell me when any inconvenience occurs---the customer is paying $300 a month for a peak ticket, with the expectation of sitting. If you tell them half the seats are going to disappear, a significant number of this people will go into the 'screw this im driving' category, or change their commute to lines that do have seats if they can.
As far as being too crowded, yes the LIRR doesn't seat everyone during rush hour even though nominally all but 1 train does have enough seats for everyone. Some of that is load distribution and someone of that is the fact that counts are averaging out the peak days of peak trains, that being said if we have fewer seats we're forcing people to stand closer together which is going to suck a lot harder, especially since the Class 700 just has less physical volume for a similar amount of people, why would the public perceive that as better?