What route do people recommend to Italy with Velocity points to spend?

Transfer your points to KrisFlyer and book from there. Finding LH flights with Velocity is almost impossible. You'll need to be a member and once you are you can search for flights. Then once you find them, transfer your Velocity points over. There are plenty of guides on this.

Take a look at this piece we ran a few months ago, about using Velocity points to book Alitalia flights (which can only be done over the phone), which could give you a few ideas.

Alitalia doesn't fly to Australia but does fly to Italy from Tokyo and Seoul, so depending on award availability and what you want to do, it could be another option for you.

As Jazzop points out, one-way international flights can be expensive. An option here could be to purchase a paid economy return flight between Australia and Seoul/Tokyo, and use Velocity points to fly Asia-Italy-Asia return as a separate ticket. If doing that, just allow plenty of time between the Alitalia and 'Australia' parts of your trip as they'll be on separate bookings and your connection won't be protected in case of delays (an overnight stay in the middle could be best, just in case, and provides a good excuse for more sightseeing).

Thanks Chris. Much appreciated.