I guess DH felt they had to go along with BEA to get a launch customer. It's obvious now it was a dumb idea but was it then I wonder.
The problem with the stretch wasn't the airframe, it was the engines. The RR Medway was never built due to the initial downsizing and the Spey hadn't enough grunt. I don't know what the politics would have been about using US engines or if they were even considered.