A 738 is a good choice of aircraft, but as noted the benefits will be reaped by taking it to the end of its range to pastures new for a lo-co. 738 and A320 will be the absolute minimum standard for UK lo-co's soon.
Maybe a 'safe' conventional lo-co destination is still a good idea to start with, but as noted, the timings would need to be right and choice of route should be deemed commercially sound on a regional basis and NOT an airport basis. LBA and EMA must be taken into consideration by DSA, as should HUY if it were to ever attract a lo-co. They cannot plan to operate in isolation.
Lo-co is diversifying and morphing - if these guys start as they mean to go on, then capacity in the evolved model is there for the taking. Slagwagons to the Costa Brava are definitely not the way to go.