The differences in crowd sizes all stem from the differences between Sydney and Melboune as cities. Melbourne CBD is located close(ish) to the geographical center of the city, while Sydney sprawls much further outwards with the city's sporting teams reflecting this. Compare the geographic spread of Sydney NRL teams compared to Melbourne AFL teams. Melbourne can service the entire city with teams in from inner city suburbs, Sydney can't. Glebe, Annandale, Newtown and Ashfield (old school Western Suburbs) all died as the city's population spread out.
Because AFL clubs are centralized, resources can be pumped into a few (2) centralized stadiums,but the same is near impossible for Sydney. How can you convince a major population center they represent a region if they play their games 45 minutes away? So you need more stadiums which cost more to maintain and will inevitably be of a lower quality. It's doesn't help when new stadiums get hijacked by rival codes to be "multi purpose" (aka **** for rectangular sports) but that's another issue.
So you have more stadiums, smaller and further away from each other but teams that truly do represent a region which is important in a city that is a collection of wildly varying population centers. Penrith bears little resemblance to Cabramatta which bears little remblance to the Hills which looks nothing like Auburn which in turn looks nothing like Cronulla. When you travel to watch your team you truly get a sense of entering enemy territory. Yeah you get smaller crowds but there's a connection to the culture of the city that wouldn't exist if we were all figurative franchises playing in a soulless concrete wasteland like Olympic Park.
So when some Victorian comes along and proclaims "just increase crowds mate", "it's not that simple" is merely the most patient of a plethora of possible responses. The others mostly involve asterisks.