I still think a VS aquisition is the best option. Merge the long haul ops, operate a separate Virgin Brand on the mainline short haul, both from T3 LHR.
Sadly this would probably spell the end fo Baby abd Regional as both would be sold ( to EZY FR etc and FlyBe respectively, although I'd like to see a Jet2/Globespan/Baby merger)
All in all though ( leaving FR who I don't think would buy anyway) this would lead to strong UK compettion at LHR