I would be very curious to know what is the narrow body long term strategy for Airbus. Prior to launching the 320N, they determined that by 2010, technology gains were not significant enough to justify a whole new airframe. It was therefore decided to wait at least until 2030 to launch a whole new airframe and build the A320N in the interim. (engine technology improvements result in 1% fuel savings per year).
All this to say that Airbus never had the intent to stretch the 320 over 50 years. However, the A220 was not part of that equation when the 320N launch was decided. They now have a future proof, super efficient design, albeit not a true Airbus which means no commonality of flight deck. In the US, multi fleet flying doesn't exist but it's very popular everywhere else and with the A220, that's not possible.
On the other hand, making an A220-500 would most likely mark the end of the A320 while creating a heterogeneous line of products.