The 07.10 from Waterford only serves Carlow and Athy. The distance saving is only about 6 miles, but saves about 10-13 minutes (and another 6-9 minutes by cutting out the 3 intermediate stops).
Doing it to every service would discommode Kilkenny passengers, thereby reducing the number of passengers on services from Waterford and potentially have scheduling clashes. a real problem would be transferring passengers at Muine Bheag - operations like this work best when you have a central platform (Mallow, Connolly, Limerick Junction, Manulla Junction, many new stations) for quick transfers.
Does Muine Bheag have a bridge and lifts?
http://maps.google.ie/maps?q=Bagenal...5.4 4,,2,1.69 and
http://maps.osi.ie/publicviewer/#V1,670781,661371,7,3
It would have to be studied carefully to avoid the likes of the problem on the Sligo evening during the peak, where one out of place train can delay 4-5 others.