Six years on, I've done a little more research into this, and in addition to Singlecoil's answer, have found a little more info about what happened during the performance, and possibly some answers about how they even got on TV in the first place
https://web.archive.org/web/20220723141849/https://rateyourmusic.com/list/Paulie_Jay/the-greatest-band-in-the-history-of-australian-music/4/ is where I got most of the info from. The page references a Leek Van Vlalen (Sean Kelly, guitarist for TISM) video, and can be watched here:
I'm still not entirely sure how TISM got the gig in the first place, but at the time they were signed to an Australian label, Elvis Records, and were touring in support of their debut album, Great Trucking Songs of the Renaissance, so it's possible they got the spot because they were new, touring Australian talent who had just released their debut album. I still maintain that with song titles like "Defecate on my Face" and "The Ballad of John Bonham's Coke Roadie", you'd do your research before booking them. Someone suggested that they got the gig because they knew someone at the station or knew Red Symons in some capacity, but I can't find much about that.
But as for the performance, they had recently done some gigs where they had a fake group on one side of the stage, and the real TISM on the other side, and the two groups would take turns performing songs. They had a bunch of costumes left over from that, so about 45 minutes before the actual performance, they got a bunch of extras dressed up in the costumes, then went out and gave the performance I linked to in my original question.
As Singlecoil said, Daryl was unaware of what was going on. TISM's own manager was pulling his hair out because he had the Hey! Hey! director screaming in his ear, asking what the hell was going on, and also threatening to ban them from TV entirely.
They had also kinda pissed / scared Daryl off before the performance, because while they were rehearsing, Daryl came in for a chat and the band didn't want him there. Apparently the band had said they knew of a "TV personality" who had molested a girl near a pool on Bendigo street, and someone from the band had said "that's the guy" when Somers entered. I don't know if TISM made the story up on the spot to get Somers to leave (e.g. there was no pool incident involving a TV personality), or if there was an actual rumour going around, and TISM just decided to point at Somers when he came in. Either way, Somers left.
After the show, the band released the press statement mentioned by Singlecoil, mocking Ricky May (who was a New Zealand born Australian musician and a friend of the show who had died the year before), so the ban was absolutely settled then.
Also some years later, Wilbur Wilde apparently came up to Sean and told him "you're the guys who did that.. that was.. you're a c**t"
So yeah, I think they got the gig because they were touring with their debut album, and they tricked Hey! Hey! by doing a regular dress rehearsal, then doing the 28-person performance later on. They also pissed of Wilbur Wilde, pissed off the Hey! Hey! director, accused Daryl Somers of molesting someone, and sealing the deal by mocking a friend of the show.
