The 732 is definately not the best aircraft for the route, but to take the 170 back on would just be going from bad to worse. They already proved that.
At least the OJ 732 is carrying around 85 pax with bags X BNE, (and a little more than that X HIR), more than the capability of the 170.
To the quoted press release , sounds like a lot of desperation (give us the route back and we will drop any court action we may or might NOT win).
Perhaps Skyairworld should look at trying to find work that works for the type, not try and shoehorn it into something that it obviously does not, purely for its own cash flow purposes.
Anyway, maybe one day some one will find something that can deliver the goods at a fair cost.