The only likely service change would be back to every half hour rather than the 20 / 40 split they currently have, but given the high point of usage back in 2006 was 1.6m journeys which the 483s coped with, it's difficult to see where additional use will come from that would justify adding over 50% capacity to every train - which is what going for 3 car units would do.
I *think* that at peak times in 2006 there would have been 3tph at 20 minute intervals, Wighlink had the earlier catamarans in service then and could operate a three-boat service.
Put simply - even if you got a 25% improvement in use it would only return you to circa 2012 figures and even then the trains weren't exactly overcrowded.
Many peak services were 4-car units then, as mentioned by Chris125. When two-car units operate peak services, they were and still are very overcrowded at times (adding to the revenue problems as the guard can't move through the train). It doesn't seem to be uncommon on summer weekends for passengers to be unable to board at Esplanade or Pier Head, and to decide to walk along the pier instead.
... with some additional battery trains it might be possible in the future to share IOWSR infrastructure for a public service extension to Newport. While steam trains would still only go as far as their dedicated platform at St Johns, retaining double track through the station and tunnels to Esplanade and beyond could allow the Newport battery trains to reach the pier head. I suspect they they will also not wish to remove the Sandown loop.
It would be nice to reinstate some of the lines that were closed in the 1960s - had Ryde - Newport - Cowes lines survived then they might be doing reasonable business now. But I don't think there's any realistic prospect of finding the money to reopen any of them now,
I'm slightly sceptical though as to how much of a change in passenger numbers this would generate though, as the Island has a very good bus network, which goes to far more places than the railway covers. It's not as if the railway is super fast or the distances that great.
Even at its current speed, it's rather quicker than the parallel bus routes in summer, due to traffic congestion.
I've been to the island four times in the last year, three times by train, and once by car for a longer visit. On that occasion I was quite surprised by how bad the traffic delays are in a few places - most of the island roads are fine, but getting into or through Newport, Cowes or Ryde by car can be a very slow business.