I certainly wouldn't push my FO into a 40 if he is completely uncomfortable with it. Flaps 30 wasn't the problem here, they would've had plenty runway if technique was proper, 30 or 40.
I agree that with a wet runway, 7000ft, wind straight across( ie potential tailwind) , and an f/o with 220 hours on type, that pushing him into a flap 40 would be a bad idea. If the f/o didn't want to do a flap 40 then then do it yourself. The Captain clearly thought flap 40 was the best idea, yet he failed to translate that into reality. That's a problem.
As a Captain some things you can compromise on if in your professional judgment it does not adversely affect safety. The Captain accepting a flap 30 would be a case in point - based on any performance graph no doubt flap 30 was more than adequate. Flap 30 is a perfectly acceptable landing flap setting in the 737.
Would they have gone off the end if the Captain had said "I think flap 40 is the way to go here, tell you what, I'll do it and you can take us to Chicago tomorrow" ?
The answer is probably no.
Obviously not making a go-around as they left the landing zone is the main problem but, the lack of 'command' displayed as they sailed past the landing zone is ( imo) the same lack of command shown when the f/o , ( with 220 hours relevant experience) wrote off the Captains suggestion that flap 40 was the most appropriate.
In situations like this something along the lines of " yeah I'll tell you what, I'm stuck in my ways so we'll do it flaps 40 and then chat about it in the van on the way to the hotel" usually does the trick.