I was in agreement until the first comma of your third paragraph. However, construction of class 197s absolutely should not ever be considered for anything, except perhaps as what Northern's class 195s should have been. On routes like Cardiff-Portsmouth, they would be little better than the class 165/166 units. While the 197s have unit end gangways, wouldn't be tired and don't have 2+3 seating, other than that the class 197s are basically a similar train designed for relatively short-distance commuter journeys. While there are short-distance commuter routes out there that a class 197 would in theory be suitable for, the vast majority of those are routes like the Birmingham Snow Hill lines, which really should have been electrified by now. Therefore, the requirement for diesel short-distance commuter stock, that is not 'electrification ready', is zero and the 197s should not be being built.As a user of the Portsmouth-Cardiff route, the provision of suitable stock has been a concern for quite some time, the 158s providing the required ‘suitable quality’ but with capacity issue, and now we have the 165/66 units providing an uplift in capacity but with a woeful travelling experience.
This route has really become the UK’s Cinderella regional express route, linking no fewer than seven important cities, with tired high-density stock designed for relatively short-distance commuter journeys.
With no suitable stock available for transfer from other areas, a further batch of two and three car class 197s should be considered, to provide a much-needed uplift in quality and allowing for the knackered clapped-out NSE era units to be scrapped. Spending further money on upgrading such tired nearly life-expired stock, which is completely unsuitable having never designed for this type of service, is just a case of throwing good money after bad.
Instead, what TfW and GWR should have been looking at is a new build of 100/110mph bi-mode units based on the class 397, but with the gangwayed cabs of a 196 (or, to put it another way, a bi-mode 444). In a few years time, when the 158s and 159s are life-expired, Northern will need something similar as well, for the likes of Settle-Carlisle, SWR will need some for the Exeter route, ScotRail for the few routes not included on it's electrification programme etc.