That's a rather unique question.
For an undergraduate degree in Mechanical Engineering, I'd say UMelb would one of the best. And probably USyd and perhaps UNSW very close behind. ANU, which is "highest ranked" in Australia is much more of a graduate university so the undergraduate degree isn't THAT great from what I've heard. (I went to ANU on a maths camp once (yeah, shut up), and my god but Canberra is boring =P) I've from Perth so my knowledge of eastern universities aren't too good.
UWA (Western Australia) is quite decent in engineering, especially mining if you might be interested in that since the mining industry is huge over here. That said, Perth is a very nice quiet city, but terribly boring. So if you're looking for a fun life outside of university, UWA might not be such a good option.
Anyway, to answer your questions
1) Australian quality of education is supposedly up there amongst top US institutes, assuming you go to a top university that is, think Go8. Undergraduate doesn't *really* matter, especially if it's engineering. Most of us just want to get out because we like the US, I think that's the case for everyone else anyway =P.
2) Selectivity is rather weird in Australian universities, we don't holistically view applications. If you make the mark, you're in.
Entry requirements : International : Future students : The University of Melbourne
According to that, you'll need an average of 75% to get into Engineering. I'm not sure if that's your average or your Grade 12 stuff. If it is your average, you'll need to get 86.5% this year (Good luck!). I'm not actually sure if they take SATs into account, but I'm pretty sure they don't care about your ECs.
4) Internships are really scarce over here, so I'll let the others answer this.
Good luck!