The solution would be to entice clubs to other parts of the downtown core, so that there isn't such a large volume of people in a one or two block radius. Closing down the entire district however, is bad public policy, as a 'world class city' as council likes to refer to Toronto; needs a world class nightlife.
I have no issue with seeing clubs in other parts of the city. However, some residents in those parts may not like the results.
With respect to "closing down" and entire club district, one of the problems actually revolves around calling the entire area a "club district" when in fact
entertainment is the general designation. The district includes, among other things, many hotels, restaurants, retail stores, pubs, cinemas and theatre venues - along with a range of other businesses. There is even a great rare book store in the area. It's hardly an exclusive domain for clubs, and that idea has to change.
Increasing residential development will also continue to change the area. It will become more diverse and more interesting - which is necessary for a downtown neighbourhood. It's clear that some clubs will always be in the area - albeit greatly reduced in number and, as a result, reduced in terms of negative effects.
As for "world class" nightlife, I'd suggest a closer look at
some of these venues. "Class" is not a word that instantly comes to mind.