The Scorpion Urban Fighting Weapon was a single-shot underbarrel rocket launcher developed by McDonnell Douglas as part of the Multipurpose Individual Munitions Program (MPIM) for urban combat.
During the 1980s, the US Army commenced the Multipurpose Individual Munitions program, aimed at equipping infantry with a more effective weapon for urban combat. One of the candidates was the Scorpion, a weapon offered by McDonnell Douglas and sponsored by the US Army Missile Command service.
The concept of the Scorpion was for a small rocket launcher that could be installed under an M16. The Scorpion was a disposable launch tube weapon similar to the M72 LAW, simple to operate and maintain without affecting the rifle it was mounted on. The Scorpion had its own fire controls, and was aimed using the existing sights of the host rifle.
During testing, the Scorpion met penetration goals, but failed to meet weight goals and was criticised for rendering the host weapon too unwieldy for close quarter urban fighting, due to being only slightly shorter than the M16 itself and more than doubling its weight while mounted.
What enhancements was it supposed to give compared with the existing M203 grenade launcher?
I expect it would not be seen as a replacement for the M203.
The 203 was anti-personnel while this would be anti-material.
Could be range and penetration
Scorpion https://www.militaryfactory.com/smallarms/detail.php?smallarms_id=1178
M203 https://www.militaryfactory.com/smallarms/detail.php?smallarms_id=6
My guess is payload. 40mm vs 55mm maybe they wanted that extra 15mm for more unique munitions like HEAT rounds.