My wife & I enjoyed outrageously good Italian fare at:

Icebergs at Bondi Beach

link: www.idrb.com

Sydney is a great food town, on par with San Francisco. Definitely try all the Asian influenced fare while there.

And of course, consistently ranked as one of the top 5 restaurants on the PLANET, Tetsuya's is a hard table to get, but worth every cent.

link: www.tetsuyas.com

Also -
For a flamboyant stage-set - Wildfire on Circular Quay
For the most incredible view of the Harbour Bridge at night - Aqua Dining at Milson's Point
For breakfast or lunch - Bathers' Pavilion at Balmoral
To chill out in the evening, with another stunning view of the Harbour Bridge and the City, listen to cool music and eat reasonably - The Opera Bar (below the Opera House)

I'm sure someone on this site recommended Sails Restaurant in Lavender Bay, but I can't find it. Our best meal in Sydney, with a beautiful view of the bridge and the City from the 'other side,' with Sunday lunch at Icebergs coming a close second.
Thanks for the suggestions.

Watch where you might like to eat at www.sydneyfood.tv
An inspiring site that features well shot videos on restaurants showcasing signature dishes and comments from owners and chefs.

For something a bit different, Surry Hills has got some fantastic restaurants. Sugarcane (by the owners of the famous Longrain) is low-key.

For an excellent Tapas experience, try Bodega. They don't take reservations so the best bet is to go for lunch when scoring a table is more viable. See:

http://travelinsider.qantas.com.au/bodega_sydney.htm

(there are lots of other good suggestions on this site)

bon appetit :o)