Connecting these empty lots and parking lots (visible on the satellite image) should be a priority.
A new street would activate and provide more window frontage on blocks that are currently far too wide, therefore tremendously increasing the potential for real estate development and new tax revenue for the city.
Models can be found from elsewhere in New Haven, for example, the Temple Street Plaza, which breaks down a large block into a series of pathways connecting College, Chapel, Temple and Crown. What makes cities successful these days are the "nooks and crannies" like these.
Other small streets in New Haven have since disappeared due to urban renewal. For example, Pitkin Plaza, now home to 360 State, used to be a small street.
See here for additional discussion of the idea, recently presented by architect George Knight: http://newhavenindependent.org/archives/2008/02/knight_blaze_ne.php The proposed street should be extended all the way to the Coliseum Site and perhaps tie in, through an indoor arcade, to the Federal Plaza (former Court Street) located just north of Chapel, between Orange and Church.