Definitely not a new idea
Fluid Mechanics applied to traffic has been used for decades in research institutes (i've worked in a French Institute who created several urban traffic simulation and monitoring application)
As well, there are a lot of ways to modelize traffic : multi-agents (each car individually considered from a behavioral point of view), fluid mechanics (traffic as a flow) or even statistical theories.
Each way can describe a particular view of traffic, and can give you some general ideas. How do you think people can brodcast traffic jams ? They have to modelize traffic in several points and apply a model to see what will possibly happen. In no way there is spying here, or misconsideration of humans.... It talks about patterns, systems, models. Physicists and mathematicians does that everyday in every country and they're not all from DARPA !!!
The point of the articl is pretty poor, sorry to say that... Modelization is the ability to approximate complex mechanisms with a finite (and little) amount of data. Nobody will ever be able to consider the speed, orientation, weight, velocity, Cx of each car to describe exactly what's going on in traffic lanes, unless it has installed software on your car that tells him what you are doing. And if somebody does that, then you can consider it is spying....
When you're a hammer, all the problems start to look like nails; When you're writing for The Reg, all that comes from a defense agency is spying, and part of an agenda to alienate each human being on the Earth's surface ;-)
Thanks for the news, anyway