I've celebrated the New Year twice in Sydney - it's the best place to see the New Year in! The first time I stayed in a Harbourside hotel which was very expensive (the price literally triples on New Years Eve) and I also paid to attend a New Years Eve themed party at the Opera Bar which is just across the harbour from the bridge so you get a really fab view of the fireworks. Can't remember how much the ticket was but I seem to remember it was in excess of $150, but worth it as the party was fab! So all in all, it was very expensive.....but that's how I wanted to see the New Year in.
The second year I celebrated NYE in Sydney, I was staying at a friends house, so saved on hotel prices and had a picnic in Hyde Park in the early evening (also free, apart from buying the food and drink etc) then walked down to the Harbourside later in the evening to grab a space to watch the fireworks on the bridge. Both times were just as enjoyable as each other so whether you make it expensive or cheap, you'll still be in for a good time!
As as for crowds, well yes, there's no way around it, there will be massive crowds around various viewing points around the harbour. I don't like big crowds but didn't have any problems in Sydney on NYE. Everyone's so friendly and so happy and I must say, Sydney really knows how to put on a party! I felt completely safe and the organisation of buses in the early hours to get back home was amazing!
Whatever you do, or wherever you spend NYE it'll be great!