A study about living in quiet vs. busy streets written by Joshua Hart confirms previous results in the USA:
This says that "people who live with high levels of motor traffic are far more likely to be socially disconnected and even ill than people who live in quiet, clean streets."
I suggest reading Joshua's own blog entry, or the report itself published on the living streets website.
Dutch residential streets rarely have this problem
Residential streets in the Netherlands are rarely through streets for motor traffic. As a result, they are usually quiet enough for children to play.
Where busy roads come close to residential streets, the noise of motor traffic can be reduced in many ways. Quieter road surfaces can be used, speed limits can be lowered, and of course you can reduce the amount of driving by increasing the amount of cycling. This requires that cycling is made sufficiently pleasant as a manner to make journeys so that people will opt for it themselves.
People on busy streets elsewhere who "largely lived in the back rooms of their houses and chose dark or black curtains to conceal the soot build-up from vehicles" are living on streets which are also hostile to cyclists, leading to a spiral of lowering life quality.
A Dutch solution
There are busy roads in the Netherlands too, but they rarely go right past people's front doors. These three photos show a busy road in Assen and the barrier which separates it from where people live.
The houses are behind a layer of trees as well as a noise barrier. So, walking from the houses through the barrier you will successively see these three scenes.
First there are trees to hide the barrier from the homes. The barrier itself is around 4 metres high and consists of tinted toughened glass at an angle to reflect sound upwards.
The road behind the barrier has a 70 km/h (43 mph) speed limit despite being a dual carriageway. It also uses a quiet road surface. Cyclists and pedestrians have other routes so that they do not have to share this road, nor be inconvenienced by having to stop at the traffic lights.
The result of this is that the motor vehicles on the road are inaudible inside the homes on the other side of the barriers, and extremely quiet even in the gardens of those homes.
People live in houses here with exactly the sort of social interaction described for "Light street" in the paper.
There is also another view of the same barriers, including video and a later blog post illustrates how the original main road in this location has been civilized for cycling.