B737-900's will work well for a low cost carrier who uses both forward and aft doors for embarkation and disembarkation, thus keeping the transit times reasonable. Airlines offering premium service require the pax to use only the forward door so that caterers can access the rear galley to resupply the aircraft in a reasonable timeframe. The extra time taken if only the forward door is used adds 10-15mins to each transit which results in one less sector being flown by the aircraft each day and thus makes the economics of the B737-900 not suitable for a premium airline. Qantas' research found that 180 seats is the max single aisle configuration that allows a reasonable transit time - if a larger capacity is required then the B767 becomes more efficient and, some time in the future, the B787-8's (which will be used domestically after Jetstar re-equips with B787-9's) will be significantly cheaper.
The big decision for Virgin Blue to make is, are they going to stay a LCC or are they going to morph into a premium airline. If their future is as a premium airline, then I believe that the B737-900ER is the wrong way to go.