He did say it was pre-extension. Here's a video of a 737 landing at Vagar before extension incase you're interested:
Although DND could handle E170/190 etc the catchment area is small and with considerably more options available to all London Airports and much more from EDI/ABZ, the market is just not there for any sort of expansion no matter how small. You do have to wonder how long the STN service will last and if that fails, I imagine it'll be game over for pax ops at DND.