I would submit a question in writing on the official Aust Post page asking whether that is correct as I suspect it is not. If you don't have any luck then try via the Aust Post company secretary.
I think it is a violation of their commercial eftpos agreement actually.
I would also suggest sending an email to Woolworths quoting the refusal by Aust Post as the T&Cs for the cards do not indicate any special restrictions on their use.
The reason they are able to refuse is because on the gift card itself, it states something along the lines ; for use to purchase merchandise and it was up to the discretion of the retailer whether or not to accept. Don't have the card infront of me but after I read it, I think they have every right to refuse because of those 2 terms.