a new flash aircraft does not bring a game changing level of efficiency, any 737 replacement would have similar engines to the A320neo, the economics just would not justify the change for many airlines who are already invested heavily into 737 and A320 fleets and parts.
No, the world moves on. The big change of the 737-300 was the new CFM engine. They didn't continue with the long established, heavily invested in skills and parts on the 727 and 737-200 (and competing DC9/MD80), JT8D engine, and this was well before the A320. And they took all their customer base along with them.