I was in a very similar position to yourself, but a year earlier (finished 2006).
My UAI was 98.3 so I obviously couldn't do CSP law at Usyd but I could do full fee paying. However, I was never really set on doing law at this stage so I dismissed the latter option.
I selected Commerce at Usyd for first yr study. I aimed to achieve a D average and I achieved it (albeit only just). I then applied to transfer to CSP law after 1st yr study. I made the cut. Like you mentioned, it was extremely competitive this yr thanks to your awesome cohort! In fact, I only scraped into Usyd Law CSP in the Late Round!!!! Fortunate, huh?
I am pleased to learn that you didn't accept Usyd law DFEE as there is the possibility of being locked into annual payments which are incredibily expensive, over the duration of the 5 yr course.
In fact, I have been told that you have as much chance transferring from say a Commerce degree to Law CSP as from Law DFEE to Law CSP. And consider the risk you take of the latter option. Now, I know that sounds ridiculous but do you think the Uni is in any rush to transfer a full fee paying student to the same couse (within the same uni!) without the full fees??
I only hoped that you considered the path that I took: do a degree at Usyd, work hard then apply to transfer after 1st yr. If you miss out, do graduate law at Usyd later on which is much easier to transfer into to.
However, I am still VERY optimistic about your decision. Univerisities love to attract high performing students (like yourself) from rival univerisities. So, with your impressive UAI and an above D average at UTS, I cannot understand why they wouldnt refuse entry for you into CSP Usyd Law after 1st yr.
Best wishes for your 1st yr of Uni. Have a good time and work hard! Don't be discouraged if your grades in Semester 1 are not as fruitful as you had hoped for. I assure you, you will do much better in Semester 2 as you learn HOW to prepare for Uni assessments more efficiently (and understand what is required of you). You might be thinking "yeah yeah..blah blah" (as did I) but it is the truth.
Hope to see you roaming the corridors of the new USYD Law faculty one day, if you haven't already decided to stay with UTS (which, of course, will treat you very well too). Oh and by the way, awesome work with the UAI considering the nature of the subjects you took. Very impressed.
Adam