rgs - I live in zone 4 in London.
Because schools will be on holiday during the Olympics and Paralympics, many families may well be on the beach anyway. A lot of people who might normally have spent their annual holiday touring the UK will expect the Olympics to cause chaos and decide to go to a different country instead. Finally, I'm expecting that because of the Olympics, people will be a little more tolerant of transport snarl-ups, e.g. at Heathrow.
Fianlly, while the Paralympics involve the same level of logistics, I would expect that the Olympics will be the bigger draw to many of the crowds.
Maybe immigration at Heathrow takes an hour rather than 10 mins - this is not the end of the world
The point I'm trying to make, is that while Heathrow and London's infrastructure will be stressed, it'll cope - I'm not expecting any huge failures, and I think the story about Heathrow not coping is just a journalist trying to put together some words to make a story that attracts eyeballs.
As to whether the Olympics are *desirable* for the economy, that's a completely different subject !