...are they so bankrupt for a movie title that they do something like this?
Well, look on the bright side - according to Wikipedia:
"According to the then Premier of New South Wales Kristina Keneally, the movie will earn the NSW economy AUD$120 million (US$118 million), with the shoot expected to last seventeen weeks and another thirty weeks to be spent on post-production. A reported 275-person crew will be employed during the pre-production stage with more than 400 cast and crew being employed during principal photography. Another estimated 150 post-production and visual effects crew will also be employed. Filming began on September 5, 2011 at Fox Studios in Sydney."
Remember that big movies also put a lot of people to work and can be great for local economies. Not a big deal in Hollywood (there are plenty of movies to go around), but elsewhere it can mean something.
Also, if you are going to have DiCaprio in your film, you cannot make a nice little Indie film (unless he is willing to work for peanuts). He is one of the top paid actors in Hollywood at the moment. It's go big or go bankrupt when you have a huge star on board. Now they could have gone with an unknown, but would you want to see the film if some unknown was playing such an iconic character?
Finally, you have to appeal to the masses if you want to make big money and that isn't going to happen without over-the-top sets and special effects. Young folks have no idea who The Great Gatsby is, so you have to slap them in the face with it.
You probably already knew all of this, but thought I'd throw it out there anyway. I know it sucks when something you like/love is stomped on by Hollywood.
I have a feeling this is going to flop to some extent. The Hobbit will probably still be doing big numbers when this comes out for one thing (unless somehow every theater has been upgraded to 48 fps and everyone hates it). Also, if people want to see the life of excess they can tune into about 10 different reality shows at any given time and see the real thing. It will probably be nominated for tons of awards, though (set design, costume, and similar).