IIRC the overpower was because at time of design there was no suitably matched engine. The best option, as fitted, was the RB2-11 with a so called 'cropped fan'.
Not sure I agree with this comment - yes the RB211-535 was a clipped fan version of the -524, but all engine options were targeted at ~37k-38k during the initial design phase, and the PW2000 was pretty much a point design for the 757 (the C-17 came along later) - GE cancelled the CF6-32 (clipped fan CF6-50) as soon as Pratt launched the PW2000. IIRC there were only 6 orders for the CF6 power 757 when GE killed it.
One thing that helped kill the 757 was that it was relatively expensive to build, costing a lot more to build than a 737-900. So even though the 737-900 didn't have near the flexibility or range of the 757, Boeing could sell it for a whole lot less money. Meanwhile the 757-300 fell pretty flat - although it had good seat mile costs, it takes forever to load/unload that many people in a single aisle airplane so it's turn times are horrid.
BTW, you guys commenting on the 757 nose do know that the flight deck external structure (what Boeing calls the "41 Section") is common between the 757, 767, and 777
