35 arrests out of 7,500 partygoers is an astonishingly low result.
I think it's pure and simple intimidation tactics. There were sniffer dogs at xxxxx in Sydney on a Monday morning at 6AM when I was there -- major bad vibes.
Now, before a member of the police can search you, she or he needs a reasonable suspicion that you've committed a crime.
Sniffer dogs rapidly lose patience with the 'game' they've been trained (in their little doggy minds) to play -- sniffing out particular substances. And they're very susceptible to distraction by other smells, even noisy environments. If you think about the effort it takes you to concentrate hard on some complicated activity, that should give you an idea of how tired and flakey the dogs must get.
I'm pretty sure the purpose of the dogs is not to detect drugs, but to give police an excuse to search people they're interested in. Animals, especially dogs, are incredibly good at picking up subtle behavioural cues from humans.
There's no way for a member of the police to prove s/he didn't subtly cue the dog as to his or her interest in someone standing in the queue, and therefore no way to prove the search wasn't conducted without good reason.
I really hope someone gets wise and runs this argument in court, some day.
[EDIT: Venue name removed. hoptis]