IMHO the railways need a high-profile brand like Virgin... OK, they've been far from perfect but I do give some of the credit for raising the profile and acceptability (especially in the business community) of long-distance rail travel to Virgin and SRB. Whilst the passengers may have stayed on because of better rolling stock, faster journeys, more fequent services and a better service I believe Virgin's brand has gone some way to persuading people to try rail... And with the growth that's needed during the next franchise, it'll need something like that again.
Unfortunately, rightly or wrongly First doesn't have quite the same "glamour" name as Virgin. First might be able to build on where Virgin are now, but they're not a company that generates lots of noise and interest in the public, and I still think the railways needs a long distance operator that's got a higher profile. Of course, the problem now is that if the reports that Virgin's bid has fallen short of First's are correct, if they go with Virgin there's going to be some folks asking why the government didn't maximise the take in these hard times...
Andy