I think we should get the user and messaging menus into core relatively. Soon. We talked about that at the hackfest last October with general agreement, and it is consistent with how a lot of other sites on the web now, so it is what users expect.
I am more sceptical about removing the navigation or settings block. If you already know exactly how to use Moodle, then you know what settings links exist, and you can go hunting for them (but adding extra clicks on the way to finding them is bad for teachers who just want to get things done).
However, if you are just learning Moodle, you don't know what is available, so having all the options listed in one place, the settings block, is a big win.
So, for me, settings block is good for experienced users: more efficient; and good for new users: more discoverable. So, absolutely worth the screen space it uses.