You can't change China's mind.  Especially now with its rising power.  They will tell everyone to go fly kite. 

A boycott will embarrass them a bit.  Make her citizens aware that the world has voiced their disapproval.

That is a possible reaction. 

But isn't it time to knock some sense into some of them, few though there might be.

The Chinese' legendary cultural loyalty has been an age old worry of governments everywhere. It can't be helped. It's just the way we are no matter what country we are in (so this is not an issue exclusive to Australia). Even 3rd generation natives to the new home with only 50% Chinese blood (like me) or those whose ancestors have been there in the new home for so long they don't even know when and how they ended up there (like KD) identify themselves as culturally Chinese, and will undoubtedly pass on this cultural identity to a new generation, despite any Westernization that we have gained (and admittedly enjoy) ourselves. This stubbornness is what have allowed our ethnicity to exist for millenia despite all the political changes and upheavals. Others get assimilated. We don't.

Now this cultural loyalty does not automatically mean loyalty to the political entity of China. Heck most of us "left" when the PRC didn't exist yet. But it does translate to sympathy to the ethnic and cultural entity of China, no matter who or what its government happens to be at the moment (We overseas Chinese may hate the CCP's guts, but we are not going to wish for, much less work towards its downfall if it means ruin and chaos for our mainland brethen). Your Chinese-Australians have not seen first-hand information of strife in Tibet, but they have seen first-hand rioters thrashing the Chinese embassy in the city where they live. Based on what you described about their reaction I for one would not expect anything less from them, and am thankful they're disciplined and civil enough not to go on retaliatory rampages themselves. We don't need our image to get tarnished any further.

So be it. 

Over here in Malaysia, I don't think the Malaysian Chinese will be that angry.

Our government is not stupid lah. 

Our foreign ministry already sent message to Chinese government -

Malaysia backs China in maintaining stability in Tibet
http://news.xinhuanet.com/english/2008-03/...ent_7880601.htm

But what if the rioting and the crackdown was in Xinjiang where there are Muslim Chinese?  Malaysia as the OIC chair country would have to take a firmer stance.

Don't see it that way.  The US know China won't budge, China will do whatever necessary to hold on to Tibet.  The US can't achieve anything tangible. 

Perhaps, US and the European countries are reacting that way because they truly believe in speaking out where there is wrong.  Well, that's what they are talking about anyway. There might be hidden motives but what can they really achieve?

By the way, even the US Speaker is only calling for Bush to boycott the opening ceremony and not for a complete boycott of the games. 

Some news links -

http://www.france24.com/en/20080321-pelosi...-tibet-china-us
http://abcnews.go.com/GMA/Vote2008/story?id=4563609&page=1