I recall over Christmas 2008 work was undertaken to repair the tunnel lining which involved digging up some of the roads above the tunnel; no work was undertaken to lower the tunnel floor. Lowering the floor would be problematic as due to the presence of Monktonmead Brook near the approach to Ryde St Johns flooding is problematic.
Running trams along Union Road (the main road between Esplanade and St Johns) wouldn't be possible unless the trams used a rack and pinion, because the road is very steep.
I predict that one day St Johns tunnel will be closed, and the trackbed south of St Johns will be turned into a guided busway.