I'd go for staying in the CBD as you can access public transport to explore from there (ferry/train/buses) The rocks is pretty good for a short stay, stayed in the holiday inn there a few years back. There tends to be a lot of road and street closures around the harbour on new years, with places like circular quay (Opera house) being closed off in the early afternoon so people have to queue up early for the good spots, if your only there for a few days wasting one of them queuing is a waste of time IMHO. i went on a new year cruise which included all drinks and a BBQ on the harbour last new years and would highly recommend, best seats in the house!!! You can go for more formal black tie options also. Bondi is just a big **** up with a few sparklers’, the harbour with the bridge as a centre piece is the place to be on new years. But remember Prices for new years will be very high, here is a link for a company I’ve used before and found them good - [broken link removed]