There are no slots at LHR or LGW - Agreed
A LHR service is not viable on cost - Agreed
A LGW service is still unlikley to be viable on cost - Agreed
Any link needs frequency, twice daily is not enough - Hmm - 'half a loaf is better than no bread' mean anything?
There are not enough passengers to fill anything over 50 seats with frequency - Agreed; therefore Dash 8-300 would seem to fit the bill
There is nowhere else to land adjacent to LHR or LGW at this time - Shout! What about Southend? OK, its on the 'other side' but train links into The City are as good as (if not better than) LHR, LGW, STN and LTN. No slot issues, plenty of capacity, airport management wanting (at a guess) to consolidate their growth position; great modern facilities now (new terminal extension open only last week). And Flybe are going be running that route in the summer; they operate Dash 8-300s. So how about picking up the ball out of the scrum NOW and running with it?