Duncan,
It all looks totally fair to me. As far as I can see she is much better looking than you and will boost Aust. sporting profile... Surely that is all that matters.
Seriously, it's a crying shame when people who would be a credit to the country are excluded. I've seen it before. The last one I know of was a bloke from Mozambique who had just completed a PhD on a new type of welding (combined laser and gas). The technique is promising but needs more development. You'd think 'they' would want to keep him here, give him a post-doc and let him help Aust become the 'clever country' we are supposed to be.
On the other hand, and not to discount your experience, an Irish bloke I know who moved out here 3-4 years ago had a somewhat different experience. His comment was not about the rules but the attitude of immigration staff. He was standing in queues that were too long (as you do) and so had a chance to see how others were treated. He felt that as soon as he said he was from Ireland everything became much easier. Doors opened and processes flowed more smoothly than they did for others. That isn't right of course but he wasn't about to complain.
At least we aren't Switzerland. A bloke I know from there assures me you need to have relatives in an archaeological dig to get citizenship.
Finally (sorry about the rant), I'm glad they let my grandparents in, otherwise you wouldn't be reading this post.