Things certainly have changed. I used to resent investment in level crossing removals being considered public transport funding. That view was appropriate 10 years ago. However, from 2005 to 2010 metropolitan rail patronage grew by 50% and totally changed the game. It just isn't appropriate to have boom gates blocking road traffic, including buses, for the vast majority of the time in peak hour. If you added just a few more trains to the Dandenong Line then you'd find the boom gates wouldn't rise at all in peak!
Public transport exists to serve the community. So, yes this investment is about allowing more train services to operate and better public transport. Also worth mentioning the significant benefits that will be provided to bus users. There were plans being considered to split certain routes that cross train lines because it simply wasn't efficient to have buses waiting in traffic at boom gates. The recent announcements mean that this isn't required (just need to hang on for a little bit longer).
The reason that this announcement is so important is that it recognises the links between level crossings, rolling stock, signalling, etc. It's a holistic approach that is really customer focused. A single train design. When it comes times to go for next gen signalling, you only have to interface with one suburban train design (plus V/Line, freight). A line with no level crossings is much more reliable.
So the customer outcome is new trains, each of which has higher capacity than existing train, more trains, greater reliability, some new stations, etc. All very exciting. Of course, delivering 37 trains takes time but it really does mean that we have a plan for Melbourne having a true Metro style line.

I remember when the Hong Kong trains were built in Preston, the Sydney trams and last order of XPTs were built in Dandenong. As has been mentioned, the XTraps are out of Ballarat, V/Locities and E-Class Trams out of Dandenong.