As for the second part, that sounds like it could have been possible, the -8 would be a good City Flyer machine.
That is precisely the specific plan behind the order.
They were to replace the aging 767 fleet, offering dual aisle capacity that was needed in space constrained monopoly airports. It is with more than a little irony that Little Napoleon complains of carpark charges and congestion when his fleet plan created a lot of it airside at domestic airports country wide. Instead Boston Bruce Buchanan then CEO of JQ, pitched the board that JQ was to get a few, then all the 788.
His reasoning was that ironically long haul low cost didn't work. It still doesn't but that is another discussion.
Instead Little Napoleon's preoccupation with JQ now sees QF domestic denied an aircraft that would have provided brand differentiation, yield potential and the ability to swing capacity when needed.
Instead QF cram 737 aircraft into already crowded terminal areas, onto crowded aprons and congested runways and have the temerity to claim that it is 'efficient'