It has two things (interrelated) to do with the Lysander.
One, as you said, was Westland's production capacity. Deliveries of components (engines for one) may have slowed Whirlwind production to the often mentioned 2 per week. However Westland was told on more than one occasion the Lysander production was to have
priority over Whirlwind production.
Two is the rather confusing state of British close support capability, The Lysander was
sort of the reason (or the visible symptom) of the CAS malaise. The Lysander was about the only army cooperation/support aircraft that was allowed to go into production/service in 1939/40 (the 200 Hawker Henleys being diverted to target tugs). With the Army going through a huge expansion a large number of Army cooperation planes were needed which helps explain the priority. Unfortunately, the British, like many other countries, got the requirements for an army cooperation plane wrong or failed to realize that
all the requirements could NOT be meet by the same airplane. See German HS 126 or American O-47 and O-52 (and the Americans didn't include bombing in the duties) for just a few examples.
Dowding thought the Whirlwind, even if he did not want it as a fighter, might be useful as an anti-tank aircraft. This is a ground attack/close support mission even if specialized. This comment was made several months after the Lysander proved to be, shall we say
less than what was wanted in the Close Support role. Unfortunately it is not quite as easy to change production schedules as easily as some people seem to be believe, and in any case the Whirlwind had already been dropped from future production plans (even if the current contract was unfinished). The Whirlwind wound up doing similar missions to what
part of the Lysander's repertoire was supposed to be.
The Lysander's production priority over the Whirlwind is one of the many reasons the Whirlwind was not developed. What seems to be a bit unexplored is if there was any personal animosity involved. Petter being known as being rather hard to work with, or at least convince that he was wrong on certain points.
Westland, even without Petter, seemed to be trying to be a forward looking company and quite the 'stuck in the past' company that some people are trying to make out.
A few examples of
some of their previous aircraft.
1926-Westland Wizard
1930 Westland F.29/27 C.O.W. Gun Fighter
1932 Westland Pterodactyl V
http://crimso.msk.ru/Images6/OS/OS-1/48-4.jpg
600hp engine and 'fully acrobatic?"
1934 Westland F.7/30
Engine behind pilot, and leading edge slats.
Westland was no stranger to advance ideas.
British were using Hurricanes in the Ground Attack/strike role in the summer/fall of 1941.
Continued use of obsolete aircraft, especially in secondary theaters, is much more an indication of aircraft shortages rather than satisfaction with the aircraft in question, see use of Vickers Vildebeest in the Defense of Singapore.
The Air Ministry had several
very good reasons for canceling the Whirlwind when they did. Unfortunately there have been many reasons put out that are false or minor in nature and true for many aircraft early in their development cycle. Also unfortunate is that the
heir apparent for British fighter planes (the Typhoon) turned out to have as many or more problems than the Whirlwind in it's first few years of development/service. This leading to a LOT of controversy using the 'retrospectroscope'.
Sorry to be so long winded.