That is true where the binding constraint on a railway is the ability to re-occupy the same platforms to maximise train throughput unconstrained by any other issues. Namely a metro raikway, like the SWML Slow Lines.
The TransPennine route is however considerably more conplex than this.
The ruling constraint is the fact that a train stopping at Mossley, Greenfield, Marsden and Slaithwaite takes about 8-10 minutes longer between Stalybridge and Huddersfield than a non-stop train. Ditto stopping trains between Huddersfield and Leeds. Or indeed freight paths between Stalybridge and Huddersfield.
No manner of whizzy signalling does anything to sort this fundamental fact.
Platform reoccupation time improvement by closing up facilities (howsoever provided) can also be beneficial where a fast is catching up a slow at the more important stations where both stop. Of course beyond this the slow needs to turn off to get out of the way of the fast onto a slow line, or it could use a differnt platform at the major station to allow the fast to pass, assuming that exists or can be constructed.
I don't disagree that some targetted infrastructure enhancements, extra tracks and platforms will be required at critical locations to allow trains with different characteristics to get out of each others' way.
The next constraint is that Diggle Jn to Marsden is one block sectioms. This could be solved with conventional lights on sticks (or rather mounted to tunnels) if one wanted to.
I also do not disagree that conventional length blocks would be perfectly adequate for most plain line sections along the route. As to tunnels, provision of signals (or block markers) in tunnels is frowned on generally as evacuation is more difficult if a train becomes disabled or there is an on board emergency, and that is more likely if they are routinely capable of being stopped at a signal for forward traffic or in event of a signalling failure. Where unavoidable (such as protecting a junction immediately beyond the tunnel), signals in tunnels often have 'tunnel controls' applied that prevent the preceding signal from clearing unless the forward section is already clear. Intermediate blocks can be provided in long tunnels (as on metros) if absolutely necessary, but risk would need to be assessed very carefully and mitigations provided as appropriate: Maybe more lights, signs, communications etc.
Solve these, then you've still got flat junctions (Guide Bridge, Stalybridge), Bradley Wood, Thornhill) to solve and lastly city centre capacity at Manchester and Leeds. It is only the very latter where ETCS *mighrlt* make the slightest difference.
One area where ETCS does help is in safety, providing full train protection functionality (ATP) at every signal (or block marker) and speed restriction, something that TPWS currently does not (although could if desired). Expansion of TPWS with current rather dated technology would be a mistake in my opinion. A balise based solution, based on ETCS even if not a full implementation, would be more appropriate. The ETCS specs allow for that now with a technique known as 'limited supervision', a variation of the Level 1 implementation and now being rolled out in Switzerland over the entire network with completion planned for this year.
Please note that the notional level 3, even if it existed, would not in my opinion provide any further benefit over level 2 as the junction and station constraints are not overcome by being able to run trains at closer headways in plain line sections, assuming that was allowed.