As I understand it the 146/737/A32X short haul fleet occurred due to various considerations,
In the late 80s/early 90s EI introduced the 737-3/4/500 to replace older 737s. Although the -300 fleet was short lived the -400s were useful for the London routes and the -500s for European services.
The 146s were, I believe, mainly introduced to enable flights to LCY, to compete with the, then new, Virgin Cityjet. of course the 146s were seen around the network, as mentioned the UK in particular. I have never herd that they were introduced to compete with FR. Although the leases may have been cheap, operating costs would not. With 4 (unreliable) engines and a sturdy construction the 146 would have a significant penalty against any 737.
The A321 was the first of the Airbusses in the SH fleet. It was purchased to provide more capacity that the 734 for London routes. It was purchased in favour of the 757. Orders for the A320 followed on as 737 replacements. A google search would suggests that there seems to have been plans to go "all airbus" as early as 2000.