flybe have really made their money from being a regional airline, and being a regional airline that has taken on the best attributes of being a no-frills airline. I would like to point out that most pax when booking their flight will not look to the type of aircraft, but instead the fare.
With the excellent operating costs of the Q400, these savings are passed on to passengers & help to keep flybe's costs down. The 146 on the other hand, is neither a comfortable aircraft to fly in (3x3 is a pretty tight squeeze & I'm fairly slim!) nor is it as economical as it was in its heyday. I don't understand flybe's lease of the ex-THY Avro RJ100s after all of the problems that they had with that type, but not go for modern jets.
The Embraer EMB-170/190 family is currently not allowed to fly into LCY, although one of the points made when swiss ordered the jets was that they must be allowed to fly into LCY. No doubt Embraer would work on this with any operator who ordered these jets & wanted to use them into LCY. I believe it was the ERJ-170 (70-seat) & ERJ-195 (110-seat) aircraft that were to be LCY-approved. Having flown on United's 170s they are very modern & comfortable aircraft, and management, pax & crews alike seem to like the aircraft.
I'm sure flybe know what they're doing, but being a major player in the regional airline industry is different from flying the 733s. I know flybe seem determined to operate the mainstream flights, but perhaps keeping to its current bread & butter, but with different a/c than the 146 would be a good start!