I reckon vibration would be just the thing you want in that geological environment! I suspect a metro tunnel would be cheaper to build per km (smaller profile), but it would extend between Miranda and Wollongong whereas the alternative would have to only join two ends of the existing line at Waterfall and Thirroul.Tony are you looking at a single line Metro line, or double track or with the distance crossing like areas.
There are also Manildra trains on the line too.
What I was thinking about use of diesels in such a long tunnel is not gradients but the issue of ventilation.
I agree with you that I don't think I would see such a project in my lifetime either, even though this government is pretty gung-ho and supported by the Feds, so anything could happen. I think, as I said, there is a great need to focus on the performance on the great majority of the line, which is north of Waterfall and south of Thirroul. That's abysmal at present.
Depending on the length also the clearances of the tunnels there are options available that can clear the fume out, Ardglen and the Coal Cliff tunnel, depending on the wind direction or a totally still condition the fumes would more often then not overtake the engine, same with the waterboard crossing tunnel on the Unanderra-MV line. In fact very few tunnels even the shorter ones on double lines were quite unpleasant to be in both on steam and diesel when max loads were hauled. Tickhole on the up was also a coughing nightmare if the wind was coming from the NCLE side of the tunnel. today its single line and a new one built next to it.
One thing I meant to put in my above post was that I doubt that Waterfall could be deemed a station where fast trains from the Gong and south of there should stop. City bound interurban style trains from Kiama (Bomaderry) should have stops to the Gong, Thiroul, Helensburgh, Sutherland, Hurstville. Central,for primary peak hour services, the airport however could well be served by a train ex Mortdale following the coast train for the airport passengers changing at Wolli CK.