I don't want to prolong this unnecessarily but my perspective on the history is rather different.
We agree that the 20+5.56mm OICW and the 25mm OCSW were entirely different projects, one a shoulder-fired semi-auto and one a crew-served full-auto mounted on a tripod, with an effective range several times greater. In effect, the OICW was meant to replace the 40mm LV systems and the OCSW the 40mm HV AGL systems.
The OICW (by then designated XM29) then ran into weight problems so they dropped it in favour of the XM25, which was closely related but lost the 5.56mm element to save weight, and had the calibre increased to 25mm to increase effectiveness. However, the range if anything decreased slightly compared with the XM29 and since the XM25 is still a shoulder-fired semi-auto it does not compare in any way (other than the accident of calibre) with the long-range OCSW (renamed XM307) and could not be considered as a replacement for it.
The reason the XM307 was dropped was probably that similar airburst performance was becoming available in 40mm HV AGLs, especially the MK47 Striker which was designed for them. So you could say that the old 40mm HV calibre "saw off" the XM307 by being adapted to match it.
Of course, airburst technology is now being applied to 40mm LV grenades as well and, perhaps more significantly, to the new 40mm Medium Velocity rounds which match the range of the XM25. Rheinmetall's new self-loading 40mm MV gun is a direct competitor for the XM25 and may well limit its sales.