Interesting topic Karrie.
At the very heart of modern civilization are two premises. The first is that we can grow enough food and collect enough water to support very large, very dense populations that perform tasks other than providing their own food and water. The second, is that we live in large enough groups that can support great institutions. For example, a town of 10,000 people will not likely have the same access to healthcare as a city of 100,000.
The problem with these urban centers is their reliance on favourable conditions, much more so than small communities. Take Atlanta for example. The drought they're experiencing got so bad, that the city was down to 30 days notice or something like that, of running out of water. Not only do the citizens rely on that water, but the industry that employs them and allows them to purchase food relies on that same water. Smaller communities can cut back their usage with greater ease than large urban centers with such a complex issue such as resource allocation and demand.
The depletion of resources has been a key factor in the demise of large, literate and sophisticated societies. If you think of the city as part of the surrounding ecosystem, it's like a population of ants that continues to grow. Now in nature ants are controlled by carrying capacity. But humans have discovered ways to effectively outstrip the immediate carrying capacity by shipping resources large distances. Integration into the global economy allows this to happen. Consider that Australia, the most urbanized nation on the planet. This is only possible by drawing on resources from a very broad region, even while they experience nasty drought conditions.
The problem though, is eventually brought back to fundamental ecological principles. Water, is effectively our single greatest limiting resource. As cities grow, so does the demand. At some point, tough decisions have to be made. Those cities in Australia like Perth and Sydney sit on the precipice and the mitigation of these circumstances becomes very costly. Though in reality, that situation would still be a harsh reality for rural people.
Ultimately, I think the issue of sustainability will have to be looked at more in depth. Urban dwellings that can provide power, roof-tops and growing space in atrium's that can provide food, utilization of grey water for irrigation and heat recovery, etc. If you think about it, a city is more like a tree than an animal. It has deep roots, and cannot move when trouble arises.
To me, the key will be smart planning that includes more emphasis on ecological principles, rather than those that move cities away from these issues. I think building up is better than building out. Mass transit is more efficient than the rural family who each drive their cars to the grocery store.
If these issues are dealt with properly, I don't see why cities can't be an improvement. I remember reading somewhere, that despite the large size of New York city, the impact of each citizen was smaller than the national average. Perhaps I'll go look for that now.