There is no doubt the ARU was spending a lot more on Tahs top ups at that time, and it was mainly due to imported league talent (who were all actually qlders - not that it matters).
I agree that the ARU did spend more money on NRL players that were coming to play for the Tahs.
In Australian sport, the Sydney market is critical to the overall health of a sport. There is no doubt Sydney sports fans in general are particularly fickle and like to follow successful teams.
A sport that provides a good example is the NBL basketball. This is a sport that has had varying levels of success in the last 20 years going from being relatively popular to completely dying. One thing that remains fairly constant is that the sport is most successful when Sydney is winning. If the Sydney Kings are duds, most people in Sydney stop caring and the sport loses a huge number of supporters as well as financial backers.
Whilst I don't think it is necessarily fair in any way that the ARU bought players for a particular team, I can see the reason why they focused their attention on the Waratahs.