You are correct that yes, everyone can select some of the seats on the flight free of charge. However, the good seats (i.e. bulkheads) are blocked off for P1s/CLs, or are priced very high. Sure there's the T80 rule and some workarounds, but the point is still the same. QF reserves some perks for their best elites whereas other airlines would gladly hand over said perks for mere Golds (United comes to my mind here).
Anyway that is completely beside the point, which was that just because you are Gold doesn't mean you should expect to get good customer service or much in terms of priority. Over the past several months we have heard such stories as Platinum members being bumped down from J to Y after boarding. Theoretically as a QF Gold should ensure you never get bumped from a flight with QF or a OneWorld airline since you are already several rungs above most people on that flight (i.e. no status, Lifetime Bronze and OneWorld Ruby members). That's one of the reasons why people seek status is they have that safety net such that if their flight goes IRROP the airline will look after them. If there is overbooking, they bump of passengers who have no status. I would certainly hope that Qantas does not randomly choose who gets bumped from a flight but actually has a system for determining who to bump. Such a system could incorporate things like frequent flyer status, then fare class and other such factors.
But I think this story also highlights the need for there being rigorous consumer protections to ensure that passengers are taken care of. It is not the passenger's fault that they were bumped, and by definition all of this is within control of the airline. If they sold too many seats, maybe they should keep back track of things. If they swapped aircraft, well aircraft maintenance and safety is certainly within the control of the airline, indeed it is one of the thing Qantas prides itself on (its impeccable safety record) and so they would obviously have some contingencies in place should that happen (i.e. backup aircraft or extra frame to ferry the passengers over)
-RooFlyer88