Theres only one part of this which is a worry...
Sorry but there is really only one part of this which is a worry and thats the customs operative who came up and said that the passport has now been or will be shortly cancelled. Im quite certain this is very much against the law, to threaten to cancel or to cancel without notice or reason an Australian citizens passport.
Unless of course, this is really just headline grabbing and what actually happened was the customs operative turned around and said "look you do realise your passport is due to expire in a few months, yeah?"
Everything else is standard procedure, if you enter Aus (or many other countries) with a ratty passport your bound to have the passport taken and checked (I personally get stopped everytime i enter the UK, and i also have been stopped in India (of all places!) for having a ratty passport!). If you have a criminal record you are likely to be asked questions about it. Doesnt matter if it was 5 years ago or 15, nor does it matter what it is. The system flags you up as having a criminal record you can expect to be asked questions.
And Assange saying he feels unsafe in Australia is just stupid, if he doesnt feel safe in Aus i fail to think of a single country he would feel safe in.