Yes, the original plan was 5 car 197s providing an hourly service between Manchester and Swansea, where the two units would split and one continue further west. That plan ended when it was decided to remove the 170s to EMR, leaving 197s to fill duties originally intended for 197s. The shortfall was made up by TfW buying the Mk4 sets cheap and using for every other Cardiff - Manchester.
An enhanced catering offering was in the original plan (using 197s, hence the catering cupboards). The present offering has grown from that, though I would be extremely surprised if the travelling chef is profitable.
The Mk4s do need replacing in the medium term. Whilst I love them they certainly are showing their age. I think a regional express unit is what's really needed, and reintroducing cross-Cardiff running. Ideally encouraging passengers needing to change trains to do so at Newport or Swansea, not Cardiff where possible. I would say 197s fit the bill for that, fast acceleration, quick to load/unload. Not sure that another new type of stock is needed (would be nice though).
I think TfW priority for new stock will be more trams (starting with Coryton, Penarth, Caerphilly), pushing 756s onto other duties and thus freeing up some 197s. Obvious problem with that is lack of electrification, and 756 limited fuel range, but I can see them being put onto Bristol services / new Burns services in the future.