simplicio, I can understand the thought process you use, but I think you get several major, and really important, facts wrong. First, the colonies had vitually no Navy and mostly were cut off from Europe. They had to sneak ships out more than they could openly use ports. Likewise, cotton hadn’t caught on, and tobacco, while important for trade, was not something they absolutely had to sell. They didn’t have to “absorb” the goods. They didn’t have to produce it at all, or if they did, they didn’t need to sell it.
In short, a blockade would have been laughable. To devote that much of its fleet, Britain would have effectively ceded everywhere else to everyone else, while accomplshing nothing whatsoever. In fact, it would have made the British look incredibly weak internationally, while in effect granting the nascent United States complete internal control and autonomy. Worse yet, it wouldn’t have even stopped trade effectively, because the south could simply have snuck ships down to Spanish Florida and then traded (legally) under the Spanish flag.
I agree with the spirit presented here, but not the specifics. I am not at all sure Howe even could have done this even with his fleet, not enough to stop people from getting across the relatively small stretch of water at night.
That said, even past this, the British needed to:
(1) Take and hold terrain. This would be changed greatly in the Civil War, but in this era of pre-Napoleonic war, it was absolutely necessary
(2) Prevent the colonists from retaking it.
(3) Demonstrate the uselessness of continued resistance.
The problem with all this is that it essentially requires more troops than the British could easily supply. It’s not impossible, but they would need to effectively control the entire coastline and all the cities, and then have the firepower left to dominate any Continental Army force in the hinterlands. To some extent, this is what they tried. With a better strategic sense, it’s possible it could have worked. It’d be damnably difficult, though.
A political settlement was certainly possible, but Lord Howe himself more or less nixed that idea (and the dominant Parliamentary faction were unwilling to bargain, anyway) just before the war began in earest. After that, the Colonials simply had nothing to gain by a settlement.