It is an debate that is relevant to any number of dioceses in Australia, and around the world, so I think it is worth discussing.
Do you step in quickly and take tough action, including and up to excommunications? Or do you, as commenter 'carob-molasses' suggests, go softly softly in the interests of keeping the diocese going?
Change is possible
Let me put my cards on the table. I do think it is possible to turn things around in a diocese like this.
I don't think it is acceptable to let things run on just because people might not be out and out heretics.
We don't just want a church that stumbles on somehow, we want one that is genuinely flourishing, and one rooted in orthododoxy and orthopraxis, not error.
Obedience is one of the most fundamental virtues of our faith. Without it we are not truly Christians.
It won't be easy of course, and not everyone will be converted.
So what would you do in practice?
Now I don't know what Bishop Finnigan has actually done in Toowoomba, or what (the few orthodox?) bishops in Austria are doing, for example.
They may well have done some of this already. But I think it is worth trying to compile a list, based on what has worked elsewhere, for those dealing with such problems to consider!
I'd also note in this particular case, Bishop Finnigan for example may be restricted to some degree in what he can do as he is Apostolic Administrator, not the actual bishop of the diocese.
Still, here is my list of suggestions, but please do add to the list!
1. Get everyone engaged in prayer for reconciliation.
Ask every parish to have at least an hours Adoration each week to ask for the grace of renewal for the diocese.
2. Find some contemplative prayer warriors...
Find a good contemplative monastery and ask them to pray for the diocese - ideally ask them to send a few monks or nuns to live in the diocese for a period, and provide the necessary support to make this possible.
3. Find the orthodox people in the diocese, and get them to help.
Form an informal ginger group of those who have been seeking change, and get them to help identify the problems and come up with solutions. You need a counterweight to the dissenters! The challenge will be to build and develop this group into a positive force who can bring in others to support the cause, turn them from a minority to a majority.
4. Isolate and neutralise the bullies and troublemakers.
In a situation like Toowoomba a few will be the active ringleaders of disobedience - many more will be simply intimidated into going along with the seeming majority. So try and find if there is some common ground - something on their agenda that is useful and achievable that their energies can be redirected to. Or whether some need a change of job or to gain a bit of perspective by some time out of the diocese...
5. Make it clear that you are not acting alone
On the one hand, bishops are the leaders, the authentic teachers for their diocese. But they are part of the universal church, and they can draw on outside help!
Make sure your diocesan website sells the message that you are part of the universal church.
Bring in people like Cardinal Pell and other strong speakers (clerical and lay) to help preach and teach. Yes, they might get a bit of flack, and so might you, but the more different voices say the same thing, the more chance the message will eventually get through.
Beg and borrow some solid priests to help out from other dioceses and/or overseas.
6. Create a clear, positive agenda and push it hard/catechesis
Set up an engagement process to help the people of the diocese see (or at least enough of them) what the (real) problems are, and embark on some solid catechesis, including for priests.
An obvious starting point for most dioceses in Australia might be why the ministerial priesthood is essential, and what can be done to encourage more young men to try their vocation!
7. Make it clear that ongoing dissent is not acceptable.
A positive agenda though is always going to be swamped if the dissenters are allowed free reign to continue their campaign. So I do think a formal warning, and prohibitions on using church facilities/promoting dissent is necessary.
And if that doesn't work, then there are canonical steps that can and should be used to bring about repentance.