The larger aircraft theory is the one spun by Mac Bank however they are not spending any money on improving the infrastructure to handle it. Even if you wanted to run widebody aircraft domestically SYD to MEL/BNE/OOL/PER YSSY cannot cope as you couldn't park the things anywhere. QF terminal could handle it, maybe, but the
VB/Jetstar/Tiger terminal would have to be either demolished and rebuilt or extended down to the GA, neither of which will happen in a hurry.
You then have all the dramas of moving all the people around the airport at the same time. It will actually create more bottlenecks as they will be larger numbers of people around at peak times. Then there's the parking and public transport
SYD is a lost cause as a airport as long as we have 1940's ATC rules/no real public transport/curfews/movement caps. Change all that and YSSY will work as it is. Mac Bank will obviously try to drag it out for as long as possible as they have the monopoly power but the only serious solution is to build a proper large airport at Badgery's Creek and turn YSSY into a suburb.