The passenger count on the aircraft is not the only consideration. Range is equally important and in that regard the 737 falls woefully short. Try taking a 737 from Denver to Anchorage in the summer on a 90 degree day and fill up the back. The 737 leaves 20 people behind because it just doesn't have the carrying capacity. Planes are designed with particular missions in mind. It may be true that the world had too many 757s, but the 737 is NOT and NEVER will be a replacement for a 757. And, we haven't even touched stopping performance either.

For that matter how do you define larger? It certainly isn't measured on MTOG which in airplane terms is all that matters.