So it works
Still left it working both ways.. the first where it really picks
up the on hook button after you complete dialling the number.

http://www.youtube.com/watch?v=mxxvJtatNx8.

Since line-attached user telecom equipment has been largely deregulated, the only remaining rules relate to electrical safety and avoidance of above-spec currents being applied to the line. If you want the official position, you can find it on the ACMA website somewhere, if I remember correctly.

In the olden days of the PMG, the yarn was spun that anyone attaching anything to the PMG's network was "endangering the lives of PMG technicians". The union loved that line.

When I was working in radio, we regularly defied those rules to connect tape-recorder line outputs to handset microphone terminals so as to transmit program material remotely. Nobody died and nobody went to gaol. When crocodile clips were not available, or when handset microphones couldn't be unscrewed, I've twisted a few PMG/Telecom wires together in my time.

You should be able to test the setup in your Youtube clip just by holding a telephone handset microphone next to you unit's speaker for a crude audio-couple. No regulatory issues there. I think you get about 6 seconds timeout from lifting the receiver until dialling begins.

Maven

This is a bit of getting ready for my own Black Beauty,
I think I'll end up the way of sacrificing a modern cordless,
but still think this program should be written and freed up.
It's in a bit of a queue for now

Yes I would need to control the hangup button to do option A.
ie. where releasing the real phone handset only causes
the chip to start listening for the rotary dial,
and the phone number is completely dialled on the rotary phone before
the chip really picks up the handset.
Otherwise timeout occurs before the number is dialled.

It does actually work over my cordless, and I can use internet banking,
not good for a YouTube video though!

IIRC the time-out is reset once any digit-code is received, so you only need to get the first digit through to give yourself another timeout for the second digit. So I don't think you need to cache all the decadics before opening the line. Only experiments would confirm, so maybe you have already done that.
Maven

Yes that is right.

It is fine if you let the digit tones out one by one.
I thought that might be annoying to hear it for each number,
hence looking at the other option.
I think the RotoTone just lets each digit tone play.

DTMF phones were a bit ahead of their time here in Australia. The first generation 'touchfones' by Telecom still generated pulses when the buttons were pushed. Later models had a switch on the bottom of the phone that allowed the user to select tone dialling if it was available at their exchange. Now I think DTMF is the only option as all exchanges would accept tones now.

Hard to believe that a mere 22 years ago we waved goodbye to the last manual exchange in Wanaaring, NSW. I still remember my childhood holidays in the Central West of the state and wondered why everyone only had a two digit phone number.

If anyone wants to pay post like I did, this phone has served it's purpose, and I'm ok to pass it on.
It cleaned up nicely at the front, rear is a bit sunburnt.
Cord is missing for some reason, but would be easy to put back.
Cheers, B.

Here in the USA back in olden days, "The" phone company had similar rules, like no non-phone company stuff was to be connected to the phone line. And we also ignored that rule.

The phone company would bust your hump if you had "extra" extension phones on your line. But if you disconnected the bell ringer in the extension, they could not sense it.

A few people here still use rotary dial phones, and the phone companies still have to have their equipment understand that kind of dialing.

Here we are allowed a maximum of three ring equivalents which basically means three rotary dial or pushbutton phones with a standard mechanical bell motor. Our first pushbutton phones still had pulse dialling and mechanical bells instead of an electronic one and the keypads had no star or hash keys.

Some modern phones and digital answering machines place less load on the line and are considered a half ring equivalent.