They can't go into a lap sash belt until they are 4. (Disclaimer - I can't find out where I got this info from, and the rules change so often).

While they still fit, safest to keep them in the 5 point harness.
I agree.

We have DD1 still in her car seat with the harness, hasn't been changed to a booster. She's on average for height and weight for her age (5). It still sits properly on her. We had her in a booster with the normal seatbelt while we were away recently and the seatbelt didn't fit properly. Cut across her neck terribly. If the VicRoads thing is a recommendation, I reckon it will be a case by case scenario depending on the size of your child.