Agreed. Unless there is some way to reduce branch costs (you mention them in a subsequent post) branch lines could be bad investments; they would cost the same as the core piece of infrastructure but would have lower capacities.
I think that the two biggest benefits of branching come in the form of more convenient trip patterns, and reduced pressure at transfer stations. Take interlining Sheppard with Spadina for example (which I brought up earlier). If Sheppard were to be extended westward, and terminate at Downsview, there would need to be a significant reconfiguration of the station in order to handle all of the transfer passengers (Downsview may not be the best example for this though, because it was designed as a future transfer station, but take a station like Sheppard which had to be jerry-rigged into becoming a transfer station).
If Sheppard is interlined with Spadina, not only does that extra infrastructure requirement in the form of a transfer station disappear, but so does the potential choke point it creates. I mean, if Bloor-Yonge was designed with a wye from WB to SB, and NB to EB, it's very likely that the mess there today wouldn't be nearly as bad, especially if B-D trains could round the loop and then merge with B-D again between St. George and Spadina.
And of course, either of these configurations would be much more user friendly, because let's face it, people hate transferring. I bet that if Sheppard is extended west, but not interlined, that you will still see the majority of Sheppard users transferring at Sheppard-Yonge. But if Sheppard is interlined with Spadina, I would bet that the majority of riders would stay on passed Sheppard-Yonge, and stay on that train to head downtown.
Another criteria for successful branching could be that core route should be a destination for a substantial portion of rides originating along the branches.
Using the example of Jane->Eglinton, what would be the use? Intuitively, the origin-destination pairs along those routes don't match up. Only significant destination I could think of would be the transfers at Eglinton West and Eglinton. But then why not just bus East along Sheppard or Finch or Steeles?
But that branch not only serves long distance patterns, it also serves local patterns too. A lot of people would ONLY use the Jane branch, and not stay on it until it reached Eglinton. Yes, it may not make sense for someone from Jane and Finch to travel all the way down to Eglinton just to turn in and transfer at Eglinton West Station. But if someone is coming from Wilson & Jane, or Lawrence & Jane? I'd bet that down & over via rapid transit would be faster than over with local transit, and then down with rapid transit.
Globally, it seems that most rail systems with branching are commuter or regional (RER, S-Bahn) basically following a trend of suburban branches->downtown core tunnel.
This is very true. For example, look at the S2 and S26 lines. Multiple suburban branches, but they all funnel through a single line through the central city (and in fact use a single central platform at Friedrichstaße).
http://www.alice-dsl.net/o.debernardi/ode/ode/root_h/images/mapb/mapU-S bahn.gif