The building of an isolated SG network in CQ - NQ makes no sense unless it connects to the National SG. Even now it makes no sense to convert the Mt Isa line to SG. The NG lines in Qld do all that is required of them and are all interconnected for operating flexibility. having two gauges would only lead to more complex management and operating issues.
To suggest that this should have happened back in the 1950s and 1960s takes no account of the railway and Government finances at the time and the low traffic levels. Yes the lines were vital, but tonnages were not high.
My understanding is that the Federal Government would have supported the conversion of the Mt Isa line to standard gauge, so it would not have cost the Queensland Government significantly more. Thiess Peabody Mitsui wanted to build the Moura line to standard gauge, and that wouldn't have cost the Queensland Government any more.
The Federal Government paid for the conversion of the Mount Gambier line to broad gauge with the intention of it being converted to standard gauge later, which sadly never eventuated. So it is clear that funding was not restricted to links between state capitals, although that aspect gained all the publicity.
The WAGR ended up with both standard and narrow gauge lines to Kalgoorlie, with branches north to Leonora and south to Esperance. They converted the branches to standard gauge, and lifted the parallel narrow gauge to Kalgoorlie. There was no traffic to justify the conversion, just simplifying operation. Subsequently, the Kwinana iron ore traffic went away (after nearly destroying the interstate standard gauge link, built to inadequate standards.) The mine at Koolyanobbing changed hands and ore was exported through Esperance for more than twenty years, providing a good income to the WAGR and its successors until the recent announcement of imminent closure.
The sequence of events I outlined would have provided a progressive change to standard gauge in Queensland, starting with Bowen and Collinsville to Mt Isa, then the new Central Queensland coal lines including Emerald-Rockhampton-Gladstone as dual gauge. The North Coast electrification would have linked Brisbane to Gladstone by 1988. Rockhampton Bowen could have followed some time in the last thirty years.
Then there would have been standard gauge from Brisbane to Townsville, and real open access would have provided competitive services on that network. Townsville to Cairns would have followed.
In the mean time, the Sunlander could have swapped bogies at Townsville, as could any significant through freight traffic.
Importantly, the construction cost would not have been significantly higher than that expended in the many upgradings carried out to date, but the advantages for open access would have been very significant.