My wife and I did SYD for NYE 2002-2003. I doubt we'll ever have a more memorable NYE, although we're certainly striving to surpass it. We took down a bunch of Gold Passport points to stay at the Park Hyatt on the 28th, 29th, 30th, and 1st, and paid revenue (about $350 U.S., if I recall) for the 31st. Watching the fireworks from The Rocks was absolutely awesome. I might suggest trying to get over to Mrs. Macquarie's (sp?) Chair, if you don't mind spending your entire day of the 31st there. While The Rocks might be a smidge more festive, the Chair will give you an even better view of the fireworks than being at The Rocks, which puts you quite close to the bridge. The photo we took there later that week became our holiday card this past year.

BTW, the Aussies were absolutely spectacular--everyone with a very casual attitude, with nobody trying to pick fights as I've encountered in ORD/NYC/SFO. Then again, it's so warm there on NYE that there's no reason to be a jerk.

Two other things--make sure you climb the bridge in SYD, and be aware that if you're looking to do a picnic on NYE, try to find bread before 5 p.m.--very few choices thereafter.