So we're saying the ATR72 / DHC8-400 series is too big
For the IOM route I would say yes, the ATR72 is too big. Probably even a 50 seater outside peak hours. A DHC8-100/Saab 340 type would probably be the best fit it it allows to cover the foxed costs and still earn a profit at 35 seats.
As far as flybe is concerned I seem to remember that they are bit reluctant to use the beast for steep approaches.