I've spent the last few days pealing and scraping paint off my walls... I suspect it's a water based paint as it seems quite flexible. What I've been able to scrape down to is a very hard layer of paint that has excellent adhesion to the gyprock - I suspect it's an oil based layer.

What I need to know now is what to do to get a water based paint to stick well to this base layer. Do I sand, do I wash with sugar soap, do I use a primer, or just slap a coat on and don't worry about it... Is there a brand that will stick like shit to carpet no matter what... All I want is the new coat of paint to last for a reasonable amount of time.

I'm sorry to have to tell you... But this IS australia...... Of course there isnt

No, we have tried this, and it just doesn't work. We are going to have to either go back to bare gyprock/wood, or give in and use an oil based paint. I'll have to move out as the fumes make me sick.

You have the general idea.
lightly sand (by hand -- not machine) with a 100 grit piece of sand paper.Don't take it back to the paper.You are not removing the paint, simply roughing up the surface to change the oil surface into a surface that provides "teeth" or "bite" for the latex paint to adhere.
Wash the walls to remove all the dust, dirt and grease and loose paint.
Apply a coat of primer to the wall
Leave it to dry for 2 days.You will need to apply two (2) coats for good coverage.

I find I'm doing loads of painting lately.I hate it!