We are going to New Zealand in March and my husband has decided that we should include SW Australia. Right now the itinerary is Sydney 4/5 nights, drive to Canberra and spend 2 nights and drive on to Melbourne for 3 nights. We have a few more days that can be added to this part of the trip. I would appreciate some help from this excellent forum -special drives, museums, small towns, historic sights, markets, local areas. Thanks

3 nights is not long enough in Melbourne.
There are so many day trips you can take from Melbourne.
1. Phillip Island day tour
2. Go to the Great ocean Road head to Lorne, it is beautiful

there is much to see in Melbourne as well. Zoo, The Dandenongs, Melbourne Museum, Eureka Tower, also walking along the many arcades in the CBD that have many great restaurants and cafes.
Shopping is also great.

I agree with the above, lots to see in and outside of Melbourne, if it is not too late to extend your nights, you might do so.

As you mentioned markets, I'll recommend Melbourne's Queen Victoria Market. Tremendous variety. You can buy cheeses and breads, gorgeous produce, meat and fish, handmade soaps, leather goods, luggage, didgeridoos, and so much more.
http://www.qvm.com.au/

Ian Potter Centre: NGV Australia at Melbourne's Federation Square is a must.
http://www.fedsquare.com/culture/the...ngv-australia/

The heart of Melbourne's CBD is very walkable, but the city also offers a free Circle City Tram that operates in a circular route past major tourist attractions.
http://ptv.vic.gov.au/route/view/1112

The Yarra Valley wine region is just outside of Melbourne and there are some terrific wineries there. If you don't feel like driving, then you can take a tour that will pick you up from Melbourne's CBD.
http://www.visityarravalley.com.au/
http://www.winebus.com.au/yarra-valley-day-tour

SE Australia, but that's a silly quibble. Sydney 4/5 nights is enough. Do stuff around the harbour. Bridge climb. Ferries to the zoo, Watsons Bay Pub, Manly, Parramatta. Take a train to Katoomba for a day, spectacular Blue Mountains but local ferals.

The drive to Canberra is about two-and-a-bit hours of a very boring Hume Hwy, best places to stay are at Manuka/Kingston, also best places to eat. Canberra is compact, easy to get around. Visit the National Gallery, the Parliament houses, 45mins to drive around the lake, don't bother with the museum, it's a waste of your valuable time.

Another very boring Hume Hwy drive to Melbourne of about 7hrs. If you will be having a GPS in your vehicle, be warned it will probably have a pre-set against the toll roads that cost a fortune around Melbourne but are fast and direct into the city, and so you will be directed around many suburban streets to get to where you are staying. If you wish to pay the tolls, over-ride the pre-set.

Melbourne is a nice city, very different in character from Sydney and Canberra, but like Sydney, not a friendly place to drive around. If you are staying in the city, park the car at your hotel and use the trams. For 3 nights/days you won't need it, but if you have extra time as you say, look at the Great Ocean Road, Mornington Peninsula, the alpine region.

Which brings me to an alternative suggestion for driving from Sydney. The Princes Highway follows the NSW coast south and has several diversions across to Canberra. Very scenic (whereas the Hume is faster but boring). One of the routes south from Canberra goes via Cooma through the Snowy Mountains and the alpine region of NE Victoria, and very pretty country through Bright, and through Ned Kelly country.

You have to be a bit of a driver though, as these roads aren't highways.

PS, one point of interest if you drive the Hume route from Sydney is the Belanglo State Forest (google it), where Ivan Millat (google him) and allegedly some of his family members set up a game of picking up hitch-hiking backpackers off the Hume Hwy in the 1970s-80s, taking them into the forest and then doing hunt-and kill. There are seven known bodies, but lots more unaccounted for, and there are still dozens of Millats in that area. Ivan Millat is serving several life sentences, but non of his brothers or nephews are.

Look at the Princes Hwy.

Canberra is a great place for museums, history and scenery. In addition to the museums Maree mentioned, I would definitely add the Australian War Memorial. Depending on your interests, you could spend 2 hours or 2 days there. (We usually plan on a full day for the AWM when we're in Canberra.)

With your interest in historic sites and local areas, I'd recommend a visit to the Lanyon Homestead as well.

Finally, Canberra is a great place to spot animals in the wild. You're likely to see kangaroos and native birds on Red Hill or Mt. Ainslie. If you want to see a LOT of kangaroos in the wild, do the scenic 6-km RT Yankee Hat Hike in Namadgi National Park. There's also aboriginal rock drawings at the turnaround point.

Thanks Mandalay, Diamantina, MareeS55, and longhorn55. You have given me great information. I certainly appreciate your help and will incorporate it in our trip.

While in Melbourne, you won't have to drive, even to explore surrounding areas. You can go on day tours to the Great Ocean Road, Phillip Island, Yarra Valley, Dandenongs. Just sit back and relax, enjoy the commentary as someone else does the driving.

An alternative for the Canberra - Melbourne drive would be to deter off the Hume hwy at Wodonga, to Beechworth about 30 kms, arrange to stay the night, and in the afternoon explore this 1850's gold rush town. You don't double back to rejoin the highway, total extra kms, are maybe 50.

That would mean two days of say around 4 hours driving, you may be comfortable with longer drives.

http://www.beechworthonline.com.au/

Ned Kelly a famous bushranger and folkloric hero to many Aussies roamed these parts.

In Melbourne, second the recommendation for Vic Market, get there early.

Also second Mornington Peninsula as a day trip where there are some fine winery restaurants. This is best with a hired car if you are okay with a drive of about 1.5 hours mostly on toll roads. If you get to MP the drive down from Arthur's Seat to Dromana is spectacular. There's several switchback turns, with glorious views of Port Phillip Bay. The road is very steep, but very safe if you obey the speed limits. Some fantastic lookouts along the way.

March will be the start of autumn here, there should be some foliage turning colour in readiness to shed .

So hope you enjoy visiting this wonderful country.

Sartoric's comment about getting to Vic Market early reminded me—you should check the schedule as it is closed some days.
http://www.qvm.com.au/faqs/

longhorn55 is correct about the War Memorial. Not to be missed, I thought I had included it as a must-do in Canberra. Diamantina and sartoric also spot on. Good advice all round.