On airlines:
I think it is questionable as to just how "skeletal" service was then, and a lot of that depends on the question of hub-and-spoke services versus through-routing. I would note that, for example, PHF (Newport News) had quite a bit of service pre-deregulation. In the years since, it has been a veritable yo-yo at times (as mergers knocked out service due to consolidation at RIC (Richmond) or ORF (Norfolk). So I think this is a case where your mileage may vary.
With that being said, I do think that deregulation combined with the mass consolidation did ultimately screw the pooch for many smaller-to-midsized airports. One thing I would note is that while in "real terms" airfares have been declining for a long time, this has been largely invisible after inflation (they've been reasonably static in nominal terms since about 2000 or so) and is also masked by the steady increase in ancillary revenue (e.g. seat selection fees, baggage fees) in recent years. [1]
I do agree that in many cases, we're coming out ahead of where we were 40 years ago...but in many cases I suspect that at least some share of the gains are down to more efficient engines reducing fuel consumption, increases in seat density, and reduced operating crew requirements (and costs, once you take into account the splitting-off of many short-haul flights to "regional" operators such as SkyWest, who IIRC have much lower costs; remember, pre-deregulation, many of those routes would have been on "mainline" through-routings). Trying to disentangle what elements of deregulation worked out well and which ones "misfired" would be an interesting exercise for a PhD student in transportation economics.
With all of this being said, I think that security regulation hasn't helped anything on the airline front. In particular, I suspect it has made it an increasingly dubious proposition to support airports (and city pairs) on the lower end of the passenger count range (I think you face mounting viability issues anywhere below 250k pax/yr). It has also engendered what I can only call a racket in "expedited security" options (how many airlines sell this as an option now?).
The new TSA plans are a mixed bag that I can't quite sort out. On the one hand, I feel like they would help smaller airports in some specific cases (particularly where you've got a lot of traffic that isn't connecting onwards), but there's a risk of enough operationally "blown" connections, airports not set up to handle kicking a bunch of pax on smaller planes out and sending them back through security (anyone want to imagine trying to deal with this at Atlanta?), and issues with having to do a Chinese fire drill wich checked luggage that some airlines may just say "screw it" and cut service. I can also imagine being a little bit annoyed at boarding a regional plane going XXX-YYY and then having to go through security at YYY to transfer to a similar plane going YYY-ZZZ (and in this case, I could see the emergence of "unsecured terminals"...there's already a side-market in quasi-general aviation services in different markets, after all...just seeing the market fully bifurcate, with the "unsecured" market having a size limit on the planes involved, would be interesting).
On CHI-MSP:
I tend to think a corridor on this route would work pretty well. As noted, there are a number of decent internal traffic-generating stops, and the timing is pretty competitive with taking a bus or driving. I suspect you could nudge that down by a bit as well (shooting for the 6:45 timetabled times of the 1950s seems like a reasonable goal for a corridor project; I'm not sure if you could pull it off with a MAS of 90 MPH or you'd need to go to 110 MPH). I'm also trying to find some of the studies from the old Chicago-Madison-Minneapolis project to figure out what the proposed end-to-end runtimes were like.
My guess is that with 2-3 "dedicated" trains (that is, not LD trains) on the route you'd have something that was pretty successful. Ideally you'd want something closer to the hourly service of Brightline, but I think you'd have to seriously knock away at travel time to make it work (pushing your average speed to 80 MPH, offering a 5-hour travel time, would almost assuredly require getting MAS to 125 MPH for some portion of the route...and I think 5 hours is just too long for a Brightline-esque model to work).
Whether there would ever be either serious interest in or funding for anything beyond this (aside from perhaps an alternate routing via Rochester) is an open question...the 400-ish miles between Chicago and Minneapolis is /just/ long enough to start stretching the viability of any sort of HSR plan (you start needing average speeds in the 130 MPH range (not far off of the Nozomi trains on the Tokaido Line, and above that of the Hikari trains). There's also the hand-wringing fact that a "true" bullet train from end-to-end would probably risk dropping intermediate stops.
[1] I'm reminded of one time when I bought my brother a ticket in F on a flight. He was confused, until I pointed out to him that buying a Y ticket, a checked bag (he was going to need one since a wedding was involved, at best straining his carry-on's capabilities), and an extra-legroom seat (he's all legs) would actually be /more/ expensive than the F seat, and F came with breakfast and drinks.
