Hi BJC, I just got back from the Mediterranean, including Turkey and I'd be happy to answer any questions you might have.
First of all, yes, the Euro is accepted in Turkey, Greece, Italy...just about everywhere. Even places that aren't on the Euro yet. I recommend getting your money changed into Euros one time as you begin your trip and change it back one time on the way back. It might take a little research on your part to see where you get the best exchange rate. We found that an ATM was a surprisingly good place to make a withdrawal in local currency at a good rate.
I don't recommend trying to get Turkish Lira for a short visit to Turkey...it's just not worth the trouble. They love selling to travelers...and were very happy to take dollars or Euros. We used leftover Euros part of the time and American dollars part of the time, no problem. When we got change in Turkish money we used some of that, too. They are very easygoing about most everything there and we found it delightful dealing with them!
I am not sure how many Australians they see in Turkey, so I can't say if your own currency would be accepted there. I am guessing not, so again...I think your best bet is to change to Euros.
One note about Turkish Lira - it used to be a ridiculous currency and people were walking around spending millions of lira for a lunch. They corrected that and the new currency isn't like that anymore. In fact, I recommend buying some of the old notes (if you can find it) just because it makes a very cool souvenier. I have a five million note. How often do you see those?
Another thing to be conscious of when you are there: When prices are posted they are usually, but not always in Euros. Sometimes an item will have just a number without a symbol for Euro, Lira, or anything. We got fooled a few times thinking it was in Euros, when it wasn't. If you are in a shop and see something you like, be sure to ask the shopkeeper.
If you haven't read it yet, you might want to check out my recent cruise review that includes Turkey. I put lots of photos and descriptions in there, and it might give you an idea of what to expect.
Take care and let me know if you have any other questions!