Yes and no. In theory, you could time it so that you connect XPT services, but in that case the appeal of simply canning the XPT past Casino becomes very tempting.
That's insane. Qantas is currently on a sale that has CFS-SYD going for $85 and SYD-BNE going for $79. For $164 you could fly the same route with a connection, and the schedules are actually tolerable - you could fly on the 0630 CFS-SYD, arriving at 0745 and connecting to the 0835 to BNE, arriving at 1005.
Not Coffs Harbour, which is about nine hours out of Sydney; Port Macquarie (or rather, Wauchope) is pushing it but you could make a day return from Kempsey if it runs to Sydney and then back out.
You're right, but the current product as a whole is considered unappealing, what with poor hard product and poor schedules, so it will need a proper revamp.
When the XPT initially entered service a day return service Sydney - Kempsey - Sydney operated. Also tried was an evening Sydney - Kempsey service dep 1742 whilst the return dep Kempsey around 0430