A few things about growing Bearded Iris: they won't flower if they are overcrowded, I had to split mine up after only three years of growth.
They dislike fertilisers that have a high nitrogen content and it should not make contact with the rhizomes as this will cause them to rot.
They dislike wet conditions.
Also mulching is not a good option, they like the warm sun on the rhizomes in summer and the frost or cold on them in winter, also mulch harbours snails etc which may eat the rhizomes.
I suggest that you dig them all up and keep any the new, healthy rhizomes that have formed and replant those.
Remember to plant them with the rhizomes exposed on the surface if possible.
Here is an excellent link for you to look at, it will answer all your questions:

Good luck

Here is a link that might be useful: FAQ for Bearded Irises

The holes are not the problem, they are a symptom of the problem. They are simply the holes left at the base of the rhizome after the roots have died and rotted away.
Do they have any fresh roots at all?
30cm is not particularly small for the length of the leaves. Too much lush growth can be a negative as far as bloom. Are the fans otherwise healthy?
When did you shift the ones you shifted? Have they had enough time to establish new roots and show growth?
For the most part they will have stopped growing at this time of the year, and will be fairly dormant until september, when you should see more growth, and by October, some flower stalks showing. If they have been neglected then they are probably very crowded, and have depleted the soil of nutrient. I would advise leaving them pretty much alone until early November, and those that don't look like flowering should then be lifted, divided, and planted into a new bed. You can prepare the bed in advance. If your soil tends to hold water, then give them a raised bed, and add some well rotted cow manure, and lime it well, as they prefer a slightly alkaline soil. A little sand will help if the soil is heavy.

I agree with the others but I feel it wouldn't harm to start to devide them up now & only keep solid rizomes no mulch lots of lime, blood & bone or whatever you have mixed into soil & like the others said leave some of the rizome uncovered you don't say where in NSW you are but a frost is good for iris I find they do better in a cooler climate goodluck with them.
Jan.

Good point about the frost Jan! Some iris just won't bloom if the winter is not cold.
What sort of soil do you have? In my experience the roots die back when there is nothing to grow into, which usually means that the soil is too dry and very compacted.
As far as covering the rhizome - this really depends on the soil type. If the soil is loose and very freely draining, there is no problem with putting up to 2cm of soil above the rhizome. If it is heavy, wet clay then they should sit up like ducks sitting on the water.
The main reasons for covering the rhizomes are to prevent sun scorching (common in Australia) and for stability in light soils. A rhizome sitting on top of sandy soil will easily be uprooted when it has a large fan, and a heavy bloom stalk.
Regina - I would describe the base of the rhizome as looking like a hairbrush which has lost all it's bristles. It is very weird when you first see it, and understandable to think it has been done by insects. The main insect pests of iris rhizomes are iris borer (not in Australia, but commonly talked about on overseas iris sites) and nematodes. I have recently seen rhizomes (not in my garden) which have been eaten out by nematodes, and the under surface of the rhizome is concave, and very sad looking.
New roots will grow from the HEEL of the rhizomes - just under the fan.
It occurs to me that you may very well be seeing the OLD rhizome, and that the little fans are growing on the NEW section at the tip. If your irises are very overcrowded they may not be increasing, and only producing one new plant at the fan end, so you end up with a series of ageing rhizomes attatched to each other - the old ones can be broken off and discarded - they will never grow.
Cheers, Jan

Wow.
Ok... first things first.
Thanks for the replies. You've all given me something to do/think about.
Yes, the rhizomes are crowded, so, since it's rained, we've decided that they all need digging up and replanting.
Now, the bed preparation might need a bit of help. I live in the west of NSW, in the irrigation area. The ground is quite clay based. This is why we've been mulching, fertilising, adding gypsum (again), and adding leaf mulch, to try and improve it.
For the first year the irises were brilliant.I was thinking this was because they were getting a "splash" of water from the hose every other weekend or so.
Circumstances dictated that this didn't happen over a couple of years and they got very minimal looking after. Honestly, the clay based soil gets as hard as bricks. I doubt whether any roots could survive properly(except the agapanthus!)
Jan, I think you're right about the appearance of the rhizomes... they do sort of look like that.
About putting them half out of the ground... isn't sunburn a problem? We've noticed that after the first few hot summer days, the leaves themselves get sunburned!
Now... any suggestions for ground preparation I'd really appreciate.
Putting new soil down is totally out of the question!
Thanks heaps everyone.
Regina

I have heavy clay here, after moving from very well draining, but non wetting soil. My clay holds water very well, and also sits above the septic drainage bed. I rarely ever water the irises. The first year I had huge problems with rot, and masses of increase which could not move out away from the mother rhizome, so the clumps were really tight and congested.
From late Nov 2003 through to around May 2004, I gradually dug all my beds (4 beds, 18ft X 9ft each) one at a time. I removed every clump from a bed, culled a lot of very poor doers, took only the very best rhizomes from each clump, carefully named them, trimmed them back and put them aside - 1 large plant pot for each variety. Then I rotary hoed in 1 trailer load of black sand (the sort that doesn't set like concrete) 1 big bag of gypsum, and 1/2 trailer load of well rotted cow manure. Once I had a fine tilth, I dug 5 trenches, evenly spaced, across the beds, and raked the soil up into 6 beds, around 6" higher than they had been before. Then I planted the rhizomes back in to the fresh bed, and started work on the next bed. It took ages, but it paid off. I have a fifth bed to do this year. It wasn't too bad before but has dropped a bit.
Clay is generally very fertile, but you need to keep it from getting either too wet or too dry. Generally it is not a good idea to mulch bearded irises, but I would advise you to try, at least with part of a bed, to see if you can keep the clay moist. I use pea straw on some beds, and find the irises do quite well. It keeps the weeds down and the soil friable, but I have to continually scrape the mulch back away from the rhizomes, as the blackbirds fling it round.
Yes irises do suffer from sunburn in Australia, and you may be able to overcome this simply by covering them with handfulls of sand in summer.
I would recommend you do a soil test for pH, and if the soil is on the acid side, be very liberal with lime. You probably don't need to fertilise, and once the soil is lightened, and easy to work, you shouldn't need to water them every 2 days. Once a fortnight is plenty. watering in the hottest part of summer will often create humidity round the rhizome, and result in rot.
That's probably more than you wanted to know, so i'll stop ther :-)
Cheers, Jan