An all 737 fleet based on an operating model like Southwest was the intention. And true, Virgin Blue started out that way.
Anybody who's flown Southwest would know if it was Virginblues intention to mimic them, they failed dismally. In the end I don't think any Australian airline would have the gumption to 'give' the passenger things like civil legroom, included luggage and the like. In the end they fell into the trap of charging for everything. Now they are in 'no mans land.' Now they are 'all hat, no cattle'
Pity, they have decent people at the coalface, constrained by inferior infrastructure set up by incompetents. The Village Idiots are something to behold, I'm told.