Polly77: Yes the 2 block rule does work, but you need space to build temples, entertainment etc., so I tend to use a 5 blocks rather than 2. i.e.

RHHHHHHHHHH
RRRRRRRRRRR
R
R Temples, Magistrates, Libraries, Bazaars etc., in this 3R space.
R
R
R Potters, Papyrus makers etc., along this line
RRRRRRRRRRR
Clay, Reed gatherers, Storage yards etc., along this line

H = House
R = Road

I tend to bring the end of my industrial road back into my housing block, so the end road is a repeat of the starting road.

Naturally this isn't set in stone and you can tweak it to suit what ever design of road/pavement/housing block you like. But, the 5 block gap does allow plenty of space for your citizen's wants and requirements.