I think you'll find on the Manchester and Liverpool to London routes the problem is not a lack of seats, it's the fact people are priced out of travelling on peak trains so they all try to get the first off-peak train at the end of the evening peak period. In fact most Pendolinos doing off peak Manchester services are quite often 75% empty so it should actually be the case that Virgin should forfeit some paths to allow Northern and London Midland to run more stopping services.
Quite possibly so. The Law of Unintended Consequences, an attempt to reduce peak overcrowding just moves it. They could just cut the price or ease the restrictions (say by allowing return portions of off-peak tickets to travel).