I'm sure brunelleschi wil have some more detailed suggestions, but basically any two hat or better restaurant will have wagyu on the menu and will be able to cook properly. You need a place that has some good stock turnover.
For me, Prime, in the basement of the GPO, is the best steak in Sydney. They have a special wagyu menu, it's on their website - all from David Blackmore. It's not cheap but I assume you knew that.
Rockpool Bar and Grill should be opening soon, so if you are coming over March onwards they might be running.
I've never been to Prime but as mr gimlet says it has a great reputation for good steak, cooked well (i mean cooked properly!!! not WELL done) If the Rockpool grill is going to be as good as what ive tried at their Melbourne outpost, i would also recommend it also.
Although it is very expensive, Mad Cow in Ivy has some great steaks but what i go there for is the Wagyu Skirt steak. You don't find this cut in many places because there isn't much of it on the animal. It is a little chewier than most steaks but the flavour is generally the best of what wagyu has to offer.
In Potts Point, Fratelli Paradiso sometimes have wagyu on their dinner menu. Call ahead and ask if they have it on any given night. When they do, ask for it served just with spinach and a wedge of lemon. and a small side of rosemary potatoes. So simple, so delicious and not overly expensive.
Hope these help!