1. YES (smaller games can afford to, and DO host Australian servers)
2. They don't need to. You don't need any of their permission to set up a server in Australia, why do people actually think this?
3. We would be fine with it because even though the characters are region locked, the game isn't. You can change region whenever you want - think of it like WoW realms, where you characters are on a specific realm but you can make characters on multiple realms if you like.
4. You don't get a decent latency, you would be getting the same as everyone else which is around 150ms - 200ms. You think this is decent, but it's not: consider that Americans consider 10ms - 50ms to be normal. We are paying MORE for the game, we deserve the same quality of gameplay at the very least.
1. Maybe you are right. Blizzard could do it. They can afford it. But would blizzard or activision be willing to spend the money on it. And if they did would it generate any more profits? Would more people buy D3 just because we have an Aussie server? I don't know. I think Aussies will buy the game no matter where the servers are. Sure for smaller games they need to get Aussie servers or they lose sales. But this is not the case for Blizzard.
2. It's not about permission it's about having the bandwidth and infrastructure available to make a high use server here. Not 100% sure if you need them to play ball on this. But you seem to think they don't. I have no idea. it was just a random thought. Maybe you know more then I do on this.
3. I for one would not be happy with it. Why should I have to level a new character just to play with my NA or Aussie friend? As it stands now I can play with my favourite character I've levelled with my Aussie and NA friends. In the same Co-Op game is I so wish. I have the choice. With separate A/NZ and NA servers we don't have that choice. We are forced to have new characters on the other server if we cant to play with them. Yes we can make characters on multiple realms. But we should not be forced to just to play with our old NA friends.
4. 200-400 ish latency IS decent enough to play D3. I have done it all beta with no issues. Yes the US people have their 50 latency. And I know they consider that normal. I'm not talking about who considers what "normal". I'm talking about what latency the game is well playable under. And for me it's well playable at 200-400. If it was not I'd be right into Blizzard with complaints to fix the latency issue as would so many other people.
So the point there is the US call 50 normal. We call 200-400 normal. We just expect different levels of latency. But the game is playable at 200-400. 600 though it does start to get noticeable. And harder to play.