Thanks very much for your replies.
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I think as long as the passengers and baggage were originally intended to be on the same flight it won't be a problem. In your family's case, it would have been impossible for them to have known prior to checking in their bags that they wouldn't be travelling on the same flight as their bags, so its not like they could have planted anything in the bags.
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Yes, I've since learned this is the policy. Which makes perfect sense really.
If a passenger checks in, yet fails to board (lateness, illness etc) then the bags will be taken off.
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7 pax unfortunately in this day and age isn't a valid reason to delay an aircraft for most airlines, but especially an LCC (as bad as it sounds). Putting them up in the hotel is probably a minimal cost considering they most likely have spare seats going out anyways on todays flight but missing their slot and the ongoing snowball from delays could be far more costly
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7 passengers were the confirmed minimum who missed the connecting flight (they were off QF442, not sure if there were any more off QF440).
I agree though, 7 passengers is not all that large of a number. I guess having the aircraft on the ground at Sydney is costly, the fines for delays would be costsly, the follow-on effect for having delayed aircraft would be a factor too.
Thankfully they had originally booked a few days in Honolulu, before having further connecting flights into the US. So they were quite lucky in that sense, they just unfortunately cannot be refunded for their missed night's accommodation booking.
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The other day I did Sydney-Bangkok-Helsinki on Thai/Finnair only to hear at my destination that my bags were 'due to short stopover at BKK currently on their way to Frankfurt on a Lufthansa'.
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Taking the scenic route. Hopefully the bags made it back to you in one peice.