How thing's in Wagga?
Well I have to say that even though I no longer live in Central NSW, I think it would be a fantastic idea. Get a few like minded mates together and start a LUG. If I had been a little more Linux motivated back when I was living there I would have looked for a local LUG.
I say do it. Invite friends and family to try Linux and spread the word. You may find that people are thankful for you introducing them to software that makes the ol' PII in the garage, a suitable PC for the children to type assignments up (OpenOffice) and view the internet (Mozilla, Konqueror, etc.) without having to outlay thousands of dollars on a new machine and keeping them away from dad's pride and joy.
I reckon all you have to do is get the word spread and things should happen. Maybe a few flyers at the 'Computer Markets' (they still happening?) or normal 'markets' may do the trick. Possibly set up a site www style for people to visit with what you are planning and when...
I apologise, too many ideas and too excited. Hope all goes well, and that I may have helped with your decision.