How are VFR / GAAP approach points selected?
The reason for VFR approach points is to provide an orderly arrival procedure into busy or complicated airfields. 

I’ll use the example of Bankstown airport, which is the primary GA airfield for Sydney. I have (very crudely) circled the two VFR approach points in green:



Two RN is the approach point when arriving from the south or west. This is identifiable from the air as a large radio tower next to the intersection of two major highways. To the north, prospect reservoir is even easier to see as a dam just south of another large highway. Easy identification from the air is a key requirement for a VFR point, so you don’t get lost. 

Why funnel inbound traffic through these points though? Well firstly, much of the airspace over Sydney is Class C and reserved for the heavies in and out of YSSY to the east. You can ask to enter this airspace but chances are you’ll be denied. To the south you also have restricted military airspace over Holsworthy, and to the north-west (mostly out of this map) you have Richmond airbase, two no-go zones. As a VFR pilot you’re not allowed to use GPS as a primary means of navigating, so tracking via these visible approach points greatly helps in not avoiding these areas. 

Using approach points also helps the Bankstown ATC. Firstly though I need to clarify that in 2010 all GAAP airports were converted to Class D airspace, which is more in line with international setups. The main change for pilots was that entering via VFR approach points isn’t actually mandatory anymore (unless otherwise stated in the ERSA, which is the case for Bankstown). 

Anyway, Class D airspace has ATC but no radar. Therefore ATC relies on procedural separation – that is, pilots broadcast where they are now and where they are going, and ATC makes sure it will be X minutes before someone else says they are on the same path.  So, if two aircraft report passing Prospect within 30 seconds of each other, ATC would probably tell the trailing aircraft to slow down or fly an orbit. 

You ask about the challenges of 'transition' but I'm not sure what you mean - these are the entry points for Bankstown, from which it is quick and easy to visually track to the circuit. For other Class D airfields, as I said before, now that they are no longer GAAP you don't have to enter via approach points unless otherwise stated. And if a procedure is stated, AFAIK it will always involve a VFR approach point.