Pretty sure that the Mk3's were in need of refurbishment at the time the decision was made.
Much better economies of scale in the UK so refurbishing hundreds of Mk3's probably made sense to them.
Also, pretty sure that Warbonnet posted in another thread that IE had funding that had to be used up at the time.
Much as I love loco-hauled trains, railcars are far less labour intensive for turnaround etc. As you say, every unit is a loco so you can just swap one out if it's in need of maintenance. There's no shortage of pulling power, ever.