Would it be cheaper to update more HSTs for the Marches?
Definitely not.
Well if NR not gauge clearing the Mk 4's is the reason for the delays to their introduction, NR won't be scapegoated, it'll be a fact that NR are the reason for the delays to their introduction
NR aren't the only reason for the delays in their introduction. They were meant to be on North Wales - Manchester services by now, temporarily. Train Crew training hasn't started yet as there is still some tweaking taking place to get the sets fully ready for service.
Looks like the HOWL itself could be run by 230s and still keep the current schedule.
The 170s are not due to go there for a couple of years yet and there wouldn't be enough work for them without the routes they are currently working.
Leaving the 170s on their current routes permanently would of course free up the units that are meant to be replacing them in a few years time, brand new Stadler DMUs. I think it's safe to say there's not a chance that those brand new units will go to West Wales and the HOWL whilst Cardiff keeps its much older 170s - so sooner or later the 170s will need clearing for other routes. The emphasis at the moment seems to be on later.
Platform clearance issues currently require them to deflate the suspension at at least one station, iirc. Slower door operation may be an issue, that's why ATW was never allowed to use them on the Borderlands, despite them fitting fine.
Ffrairfach IIRC is the issue, plus they're only allowed on one side of the loop at one of the passing places (I think llandovery). 158s would be ideal units for the HOWL in the long term, if those issues could be dealt with (and I see no reason why they couldn't) but until we hear otherwise, we must assume the plan is still for the line to get 170s eventually. I wouldn't worry too much about the issues with running 170s at low speeds - aside from the fact they get a decent enough dash back on the mainline at each end of the route (including a maximum of 90mph which should be achievable between Church Stretton and Shrewsbury northbound) they'll be mixed in with other services throughout West Wales and Crewe - Shrewsbury locals (where again 90mph should be just about achievable, albeit briefly).