Thanks very much for the kind words! You'll have a wonderful time in South America. I'm going to cover your questions one by one.
Carnaval Accommodation
Prices for accommodation during Carnaval not only sky-rocket in every city, you also have to book well in advance to get a room. I have been in Paraty and Ouro
Prêto and my choice would be the latter to enjoy Carnaval. Paraty is a very, very small coastal town.
Ouro Prêto, on the other hand, is a very beautiful, picturesque town with wonderful churches. Do book accommodation well in advance. This is something you will have to plan to make it a success.
Flights from/to Australia and in South America
I'm from Belgium and can't give you sound advice about flights from and to Australia or North America. Aerolineas Argentina has had some issues lately but this does not mean the airline is unreliable. Maybe you can check matters with the ticket provider to see if there have been re-scheduling issues lately.
Air Passes
I have found excellent information about air passes that you should check out here.
Machu Picchu
The enigmatic Lost City of The Incas should not be missed. There are 3 possibilities to go to Machu Picchu: Train, Inca Trail or Lares Trek
Train
There are daily trains from Cuzco to Aguas Calientes. In Aguas Calientes you can either hop on the bus for the steep route to Machu Picchu or do the climb on foot.
Inca Trail
Due to the impact of mass tourism on Machu Picchu only 500 permits per day are issued for the Inca Trail. This permit should be booked well in advance. The permit is about AUD310/person. The trail is closed during the month of February for maintenance.
Lares Trek
The Lares Trek offers an alternative, but equally breathtaking, hike to Machu Picchu. You do not need permits for the Lares Trek.
If I know which of the 3 possibilities you're interested in I can give you a rough price of the overall cost.