(I think I'll just recycle the comment that I left Robert Waldman on DeLong's original post, because I think it might apply here as well.)
"Excess Supply (or Demand)" has more than one meaning. Those meanings are non-identical, but related.
Waldman and you focus on the micro-economic meaning; in a single market for a homogenous good we can see whether supply for that good is greater than or less than demand when we hold prices fixed. That's a precise definition and probably the most common one.
Macroeconomists have a related and different definition. They're comparing aggregate supply (i.e. potential output) and aggregate demand. Now, in some simple models it is possible that the two meanings correspond; aggregate demand equals aggregate supply if the aggregate price level is right. That equivalence goes away in more complicated macroeconomic models.
I think another way of saying that last sentence is to say that "potential output" is not necessarily the same as the sum of a bunch of price-based supply functions.
Prices during and after bubble. Prices of safe assets were lower during the bubble as people were parking their money in riskier assets which paid higher interest rates. So demand of safe assets was lower. Or rather the supply of safe assets was much much higher as per Blinder's bubble many unsafe assets were treated as safe assets.
Post bubble prices of safe assets are much higher - as are the demand - as people are willing to lend to the Treasury at zero interest rates.
So Mill and DeLong are saying we need more safe assets? QE is supposed to lower the demand and price of riskier assets as the Fed buys them. Waldmann is skeptical of QE.