When I left the Army in 1992, only a couple of infantry companies around the country had been issued with their F88s due to major reliability problems. Not sure whether these problems were Lithgow originated or not.
I would disagree with your statement that the M16 was not widely issued. For most of my 20 years in the Army, a standard infantry section of 10 men was issued with 1 x GPMG M60, 4 x M16A1 and 5 x L1A1 SLR.
I can remember too spending months on the M16 rebuild line in the small arms section at 1 Base Workshop Battalion at Bulimba in Brisbane about 1975. Just about every M16 that the Australian Army owned came through this line. I can remember a piss up on the day that we turned out more than 100 M16s in one day. Not bad for a section about 10 or 12 blokes. I used to spend the mornings stripping incoming weapons then the afternoon helping in the test firing range.
Cheers
Rod