And what possible benefits did that site have over Port Jackson in the 1820's and 1830's that would outstrip the benefit of the Port and it's proximity to the Open water?
You're basically blaming people for not being able to predict the future. How in the name of hell are people supposed to predict the rise of the communter suburb? Which didn't happen until after WWI? Or mass commuter rail, which didn't kick off until the 1860's in any meaningful fashion?
The Biggest cities in the world at that time would have comfortably fit into a region covering the inner west and everything between the Georges River and the Parramatta River to the east of that. The county of London, a much later creation, was only 302 square kilometres, which is roughly the size of that part of Sydney. And that was easily the greatest and most populated city in the world at that time! 50 years later...
The site of Melbourne was picked because it was on a protected bay near to good moorings for ships, and a good supply of fresh water from the Yarra. It wasn't the first attempt either to colonise Port Phillip either, the first was just a spectacular failure. Dumb luck it turned out that way too, if the found fresh water at Sorrento, Melbourne would be wedged on the Eastern Arm of the gates of Port Phillip. Same with Brisbane. Redcliffe wasn't abandoned due to prudent town councilmen, but rather the fact that they couldn't find fresh water!