To retract flaps or not - that is the question...
I think 737Jock has it right. Although in theory retracting the flaps by one stage would increase the max L/D and lengthen the glide slightly, it would almost certainly increase the stall speed and possibly reduce the amount of CLMax available, which for a crash landing would be a very bad thing, given that you are trying to hit with the lowest speed and ROD possible.
AIUI modern FBW jets will not permit the stall to be entered, instead holding the AOA just below the stall. If the aircraft was at or near AOAmax when the flaps retracted, I would expect the FCS to command a pitch down to reduce the AOA, which could actually worsen the glidepath.
IMHO the crew did the right thing leaving the configuration as it was and concentrating on flightpath control and trying to sort out the engine problems.