#1 - The 737-200C (Convertible)

This is the main reason and in fact it also drives several of the other reasons by default.  Of the thousands of Boeing 737's made only 96 were ever delivered as Convertibles.  However, the ability of these aircraft to allow rapid re-configuration between passengers and freight or a variable mix of both is the only thing that makes it economical to offer jet service on the long, thin routes that the Northern carriers operate.   It seems unlikely that Boeing will ever be able to again offer a commercial 737 combi due to more stringent regulations relating to cargo area fire separations and protection systems.  To that end, the Northern carriers in Canada have been searching the world for late model 737-200C's in good condition to add to their fleets.  Alaska Airlines retired their 737-200 combis a couple of years ago and have been experimenting with a custom 737-400C with a fixed partition in mid cabin.  Rumour has it that there have been difficulties with this arrangement especially weight and balance issues.

#2 - Short Field Performance

There's nothing like the stopping power of the clamshell target-type thrust reversers on the JT8D turbofans that power the 737-200.  The high-bypass CFM56 engines of the 737 Classic (737-300/400/500) and 737 Next Generation (737-600/700/800) only reverse the bypass air flow which limits their effectiveness on shorter fields.  The difference has to be made up for with the brakes which results in higher minimum runway friction requirements for short fields and an increase in brake wear.  Flying into the standard 6000 foot runways of Northern Canada which are frozen nine months out of the year needs the flexibility offered by the ability to divert 100% of the engine thrust.

#3 - Noise Requirements

Recognizing the unique requirements of providing service into remote Northern communities, carriers are exempted from the noise abatement regulations which have caused the non-Stage III compliant 737-200 to be restricted from regular operations at most airports in the civilized world.

#4 - Fleet Commonality

If you're already operating the 737-200C in your fleet it makes sense to also use a standard 737-200 on routes where a full passenger configuration is required.  Having a standard aircraft type means commonality for flight crews, maintenance, ground equipment, training, etc.

#5 Cost

Most of the Northern carriers are small, with fleets of less than a dozen aircraft.  For a small operator, it’s a huge deal to finance a new $100 million airplane.  While there is still a hefty premium to be paid for a 737-200C in good condition, used 737-200s are relatively inexpensive due to the lack of demand for these airframes in the developed world.

First rolled out of the plant at Renton, WA in 1975 for Aer Lingus, this 737-200C is one of the older Boeing airframes plying the Northern skies. 

#6 - Reliability

Every day Northern carriers fly these aircraft into places where there are no options for maintenance.  If anything goes wrong the plane is going to be a thousand miles from home.  Making non-revenue flights to bring in maintenance crews and fly out passengers is really expensive.  To say these aircraft are 'lovingly maintained' is not an understatement and it pays off in reliability.  Cold soaking at -40C for hours, landing on bumpy runways plowed on frozen lakes, baking in the midnight sun, these planes take it all in stride and continue to perform. 

#7 Unpaved Strip Kit

The 'off-road kit' was only offered on the 737-200/200C and consisted of a nose gear gravel deflector, vortex dissipators, and assorted guards and panels to protect various bits and pieces in the area of the wheelwells and aft wing.  The Northern carriers use these gravel capable planes to support remote mining and oil & gas operations and for flying into the (now very few) communities with sufficiently long gravel runways.  There is nothing like watching a 737 take off from a dusty gravel runway (I'm still looking for a good picture of C-GDPA taking off from Tuktoyaktuk back in the 1980's).

Okay, I could only think of seven reasons.  So what if something better doesn't come along?  Only time will tell but they'll keep them flying as long as they can make money doing it.  The USAF has kept their KC-135 tankers in the air for 50 years now...