When the 175's left TfW I would guess the DfT had no intention of leasing them and they waited for the TfW 158's to be released, they could then have gone directly to GWR/Northern, that would have been a far simpler option. With the TfW 158's still not available it appears they have had no choice but to take the 175's to replace the HST's and cascade units to cover new services/strengthen other routes.
The "choice" existed - not force GWR to dump the HSTs until whatever was replacing them was running trouble-free. I don't just mean the December 2025 withdrawals - but the enforced removals from service in the years before.
Yes, it really goes back about 5 years to 2021, DfT completely miscalculated the post covid rebound, looked at some London commuter services when demand had fallen, and apparently lumped Bristol area and South West into same thought.
In reality Bristol area grew, and many stations in South West have passenger numbers higher than pre Covid (and still growing strongly).
But of course DfT and Transport minister had suspended GWR electrification, so there are plenty of spare EMUs (but no electrified lines), and GWR needed extra stock for growth in west (but no spare diesel stock).
So they picked the 175s which had been stored out in the open causing all sorts of parts to corrode, seize, and delicate electronic circuits to get damp and fail.
From a strategic point of view, wasn't just a miscalculation, more a case if it's gone wrong, everything else will also go wrong.