> I think one of the reasons that we have 120V circuits in domestic situations here was the due to the original smear campaign Edison launched against Tesla/Westinghouse promoting the "safety" of DC power.
That was a royal mess. It is hard to figure what really happened.
> Our 120V (240 CT) system is probably the result of a compromise.
No, it came about very simply.
Edison invented the Electric Bill. Of course you should have something to sell before you present the bill, so he set up some generators and wired a few blocks of NYC.
He did not have good insulation. He went camping with rubber moguls, but most wiring was semi-exposed. He knew his workers died around electricity, and didn't want his customers dying. He knew that workers rarely if ever died around 100V machinery, so he settled 100V as his distribution voltage.
Edison did not invent the Electric Light, but he did commercialize a lamp that would work on 100V power.
Although Tommy's installations did not cover a lot of area (due to the expense of distributing power at low voltages), his lamps and plugs and sockets became The US Standard. We got stuck with about-100-Volt systems.
The economics of higher voltage are compelling. But the market has great inertia. Historically the wall-outlet voltage has snuck up 2 volts per decade.
AC of course was necessary to make broad distribution possible. And AC motors can be cheaper and more reliable than DC motors. But basically we wire the home as if it were ~100V DC lamps.
Oh: Tommy used split-phase DC. He ran three wires, one +100, one -100V, one at zero. Each small building was fed one side; large buildings got both sides. Loads were almost all 100V. This gave twice the total power for only 1.5 times the copper cost, and only 100V shocks (except around very large motors which would be attended by trained workers).
There was less of a rush to electrify in the UK and Europe. Also smart men like Siemens saw more clearly than Tommy. Better insulation and plugs were developed. The key development was improved incandescent filaments that could be made in low powers and high voltages. (There are at least three major generations of incandescent lamps; Tommy's lamps really sucked.) UK/Euro residential installations generally favored ~200V rather than ~100V wall power.
> Is the neutral connection normally tied to ground or does it float relative to earth?
In general: the system has to be tied to earth somewhere. If it truly floated, stray leakage would develop huge voltage and punch-through insulation. More important, transformer breakdown or lightning could send sparks flying out of walls.
Where and how the system is tied to earth is a matter of local custom and regulations. As you say, in the US we pretend to ground the Service Entrance, and maybe also the pole transformer and 13KV lines. This can cause its own sort of problem. It might be reasonable, in dense service areas, to ban earthing at the premises and do it professionally at a distribution point.