My question is to correct the faulty parallelism.How can we do that.

"The streets were not only too steep but also were too narrow for anything other than pedestrian traffic."

The structure is parallel. Perhaps the second were isn't needed. Please check back here because another English teacher may have a better answer.

Ms. Sue is right. Remove the second were.

Here's a good section explaining parallelism:
http://grammar.ccc.commnet.edu/grammar/parallelism.htm

=)