Personally I would do the following.
Use VFF or transfer to Krisflyer to snag a SYD-Europe return for 1 in business with Singapore Airlines via outright redemption.
It costs around 161.5k KF (218k VFF) through Krisflyer or 278k VFF through Velocity (if you can find any availabilities). In summary, redemption via VFF will cost more points but less surcharge, via KF will cost more in surcharge but less points.
I always try to redeem premium tickets outright as I personally don’t have much FF status and I don’t like playing the upgrade lottery game.
However, one problem you may have is finding availabilities since June - July 2017 seats have been open since June/July 2016. However, as your timing seems flexible and there are no indications that you are not travelling alone, you should be able to to find 1 seat that you don’t need to waitlist for in the 61 days, just have to keep looking. I advise to look soon.
Reminder VFF to Krisflyer transfer are instant.
Like you have said, your chances of upgrade through VFF is much better than QF due to status. Aus-Europe is very popular and hence availabilities can be hard to come by. However, do check on Qantas too for what its worth as its is very easy to check for availabilities using the calender view for June/July 2017.
In order to save points or due to lack of points, many would consider upgrades. However, the fact that you need to pay the premium for standard/flex economy and play the chance game to get upgraded doesn’t sound like good game for me. Since, you have the point balance, I would recommend outright redemption if you can find availability.
VFF Plat also allows you to request the release of award seats too if you can’t find any. Check out VFF Plat benefits to confirm. Obviously, you have to book through VFF if you go down this route.