1. yes, if QF/PR have an interline agreement (almost certainly they do -- you can phone QF to confirm this). QF may require the PR ticket number at checkin in writing, so be sure to print it out (this is a little known "feature" of e-tickets!).
2. correct, cannot issue BP at WLG
3. correct but they will need to produce the ticket number as well the as PNR locator.
4. they will be denied boarding by QF at WLG. If by chance they do make it to SYD, then they will not be allowed to reclaim their baggage in person. PR may be willing to make arrangements to reclaim the bags, or they may stay in SYD forever

Having a camel suit in the bag might help
Best to talk to QF staff at WLG prior to travel so they are briefed on this trip and can arrange a smooth check-in. And get to the airport very early so that an hour or 2 is available to sort out any problems at check-in.