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Also, are other countries not advancing by moving from a 5.56 to a larger round with more knock down power, even in the urban warfare?
Since when? Off the top of my head, I can't think of any country that is moving towards larger-bore systems, and can think of tons that have moved smaller and smaller.
The Germans keep fiddling with sub-.22 calibers like the 4.6x30mm for their PDWs, and the like. The FN P90 and FN5.7 are in, well, 5.7mm.
Contrary to the "Hooray for .45 and .308" vibe on gunboards, very few militaries are rushing to haul out 1911s and M14s. I know that there are some units that have them, but in over a year in Iraq I saw one M14 (belonging to an EOD team) and one 1911.
G36 copy for Mexico? Makes sense to me.