Parts obsolescence is a huge problem with older aircraft - and with an electronics dominated asset like AWACS it's magnified many times.
In the 'good old days', military procurement was a major contributor to electronic components, and the component advancement wasn't nearly as rapid as today - so it was economically feasible to keep production going of otherwise obsolete components to support military and other aviation users. Today, the commercial market totally dominates the electronic component market - military and aviation are a tiny sliver of the market - and it no longer makes economic sense for a manufacturer to be making a few hundred of some obsolete component when they could be cranking out modern parts by the millions. Further, mil-spec electronics have become pretty few and far between - most military and aviation electronics use "COTS" - Commercial Off the Shelf parts that are simply screened to more rigid environmental requirements (e.g. temperature and vibration).
With something like AWACS, the cost of the electronics is actually a fairly small portion of the overall costs - it's the integration that's killer. Making all those boxes seamlessly talk to each other, while making sure the electromagnetic emissions don't interfere with other components is a massive task - made all the worse when you throw in high power radar systems.
No first hand knowledge of the E-3D, but I suspect they can no longer get the electronic bits to keep the AWACS functional, and it's cheaper to buy the Wedgetail 'off the shelf' than to create a new AWACS system from scratch.
Military aircraft seldom see 1,000 hrs/year of use, so 40 year old 707 airframes are maybe halfway through their available life, but all the AWACS systems are a different matter.