was there really a proposal to arm two B-17's in each squadron with extra .50 cal MG's, one on the left side, the other on the right, with no bombs, so that they could protect the bomb-carrying '17s at the flanks?
Yes, this was the Boeing YB-40 based on the B17F. 13 were built and 12 flew operationally with the 92nd BG. I believe that the introduction of the 'G' model rendered the idea obsolete.
....and the fact that the YB 40 was heaver than a laden B17F and could not keep up with the aircraft it was escorting. Nor did the aircraft work particularly well as a deterrent tro fighters. . Hats off to Uffz. Bernhard Kunze who shot down a flak damaged YB40 in an Fw190G2, a ground attack variant with only two cannons
The YB-40 was heavier than an unladen B-17 which was the issue. Once the bombers dropped their loads and lessened their weight by 5,000 - 6,000 lbs, the YB-40 could no longer keep up.
More than two additional .50s. The waist positions each had a twin mount and there was a second dorsal turret.
Didn't some have larger guns as well? The wiki article mentions guns up to 40mm and I seam to remember reading something about those a while ago as well. From that article it doesn't sound like they were standardized as it mentions some of the planes carried up to 30 mgs.
One more point was that the YB-40 introduced the chin turret, which added drag and made it harder to keep up with formations of B-17Fs. Ultimately of course the chin turret became standard on the B-17G. The -G was almost as well-armed as the YB-40, with 13 .50s compared to 16 (single guns in the radio operator and waist positions where the YB-40 had twin mounts). There was also one prototype B-24 gunship, the YB-41, but this was not proceeded with.
The dillemna was an armed bomber which was slower but could fly further OR using Little Friends that were fast and swift but coudn't escort all the way. The idea was indeed abandonned because it became obsolete. I still see it as a WW2 version of arming a WW1 Zeppelin : too slow and an easy target.