I'm honestly not at all familiar with downtown Lakeville -- but does extending service to somewhere like this (as opposed to more "in-line" stations) slow down the overall performance of the line to the point that it takes so long to get anywhere that people just give up?
Yes, I would say so. I think eventually in the future a Lakeville downtown to Farmington downtown bus line could be developed to enhance the red line (and orange line) in the distant future. That would only be valuable once the red line had express routes into downtown Minneapolis and or St. Paul.
So, the Red Line extension plans for stops at 195th and 215th Sts. The former is literally cornfield with large-lot SFH development planned or already under construction. The latter is intended to serve the Air Lake industrial park, but the stop would be at the far eastern end of it (and, even if they are decent-paying middle class jobs, they're not super-concentrated nor served by decent walking or biking infrastructure).
I may or may not have thought a bit about a local transit system in Lakeville
for no reason but to shout into the void. If I had to update it, I'd just route the Red Line toward downtown Lakeville at CR50 as mattaudio suggests. Maybe a future station at Aronson Park (a nice little destination with a good number of townhome/apartments north of it) could work. Terminating the line downtown instead of in the middle of nowhere by more cornfields and with only a few hundred jobs within a 5-10 minute walk of that 215th St station is a not-great idea for all-day, reasonably-frequent transit. Google says it's literally an extra minute to get to downtown Lakeville by car rather than 215th St when coming from further north on Cedar, so it's not a huge time-adder for the route. I know it's fantasy, but a frequent local route connecting downtown to Air Lake (heck, maybe even over to LNHS on the other side) would get people from that downtown node to jobs spread out along other arteries. It also then provides that option to existing residents, and if my recollection of downtown's demographics still hold true, they're more likely to need a bus route like this than hypothetical residents of new construction.
If your goal is to build suburbs that look like the pictures above, and I generally agree, I just don't know why we'd want to start from scratch. Suburbs like Lakeville see greenfield development pretty narrowly
(also lol at how they think "markets" work). Downtown has a grid, jobs, residents, cultural destinations. It may not look exactly like the pictures you posted but it's way closer, and I think the city and its residents would be more open to the idea of slowly retrofitting public spaces and allowing more mixed-uses/intensification in the only area in town where that already exists. The mixed-use senior apartment building is one example (though I really get the sense that people are okay with apartments for seniors but will fight density built for anyone else). Anyway. In the grand scheme of things I'm not sure I'd spend CTIB money extending the Red Line before basically any already-studied urban bus route, but that money is intended to be spent regionally. And, you could still get your TOD vision in the corn fields at a 195th St Station anyway.