The main road east from Hornell was not NY 17F (which went away a loooong time ago; as Steuben CR 119, the road looks like it would be a through route only by West Virginia standards) — but rather the old NY 70 from North Hornell to US 15 near Avoca (“Antlers Junction” in Region 6 parlance, NY 70 is now CR 70A).
I agree that Hornell, not Wellsville, was the focus for economic development, considering that this is an ARC corridor. This has been validated by the success of Alstom in Hornell, which has rebuilt a huge number of subway cars, which are brought in by truck. There is also significant dairy-processing business in the Cuba–Friendship area.
Another factor for the expressway location could have been Rochester ↔ Olean–Salamanca–Jamestown traffic. NY 36 between Dansville and North Hornell is generally adequate to handle it, but I don’t think you would want to send it through downtown Hornell and a bunch of 2-lane roads in Allegany County.