Sorry Queenie I was just replying to your statement that you had never seen international flights go to Sydney via another Aussie city. I understand the op is from Sydney and I wasn't suggesting to stopover there just explaining how it worked.
To answer your question it can be cheaper to go to Sydney via another city due to the loads of the planes. The particular carrier may decide to lower the price as the loads are fuller on direct flights.
I will try and clarify...
I posted an obviously very brief (and unclear) comment in the beginning to try and work out which actual airline that was supposedly offering an indirect flight to Sydney cheaper.
I'm well aware you can get flights going via other places (I even remember the bad old days of going via Auckland
) but the fact is that most flights from the US hit the Sydney international Airport first...so I'm just confused about a $500 difference if you go via Melbourne?
I haven't seen advertisements for taking the option of getting to Sydney for LESS money VIA Melbourne before.
[If it is the case that direct flights from LA to Melbourne and Brisbane are not filling they should stop offering as many.]
All I can think is that the OP has limited themselves to one particular airline they wish to fly with and hence limited their options.
As Oz-kateer points out - Delta is offering very cheap direct flights. As is United.
In short -
If it is really $500 cheaper per person then I would go definitely with the transit because customs and rechecking bags isn't a big drama.
But the concept of actually making Melbourne a stopover.......I couldn't cope with that. Not with all the luggage we get home with and utter exhaustion due to the stress of trying to pack all your goddies (while you continue to hunt for more bargain goodies
) before you leave.
The drive between Melbourne and Sydney isn't too bad...and you can get cheap airfares if you are flexible on dates and keep and eye out for specials. So I would just get home and see Melbourne when you have less baggage and more energy