Points + Pay is usually poor value, but due to the high fuel surcharges so are international economy redemptions much of the time. So in this case you may actually get more value out of your points by using it. I don't often spruik Points Plus Pay, but there are a couple of advantages. You will earn points and status credits for your flights. And you can choose to pay with a mixture of points and cash if you want to save up your points. I believe you can also request an upgrade from a Points Plus Pay booking as it is treated more or less as a revenue fare. Provided you're booking an upgradable fare (i.e. not a "Sale" fare), that is.
As a reference point for you:
-Converting points to Woolies vouchers nets you around 0.67 cents per point
-Using Point Plus Pay values points at around 0.8 cents each
I would personally suggest using around half your Qantas points towards a Points Plus Pay booking, while saving at least 360,000 of them. When you book, route via Melbourne or Sydney and fly on Qantas to Dubai, connecting in Dubai to Emirates on to Europe. You'll then be able to request an upgrade for all of you to Business class on the Australia-Dubai leg (provided you're on a Qantas flight, booked as a QF flight number). The cost is 72,000 points each, or 360,000 in total. If you are successful, great. If not, you can try again on the return leg. If you do want to do that, I would suggest flying via Melbourne as the MEL-DXB flights are usually a little less full. So your chances of upgrading could be a little better.
But don't forget about those Emirates miles - you may want to check when they are due to expire. If it's soon, make sure you use them.
Edit: Actually, I just checked and at this stage the SYD-DXB flight is looking more empty than MEL-DXB on 22/3 at this stage.