This is a simplified system of how it works (it's a bit more complicated, but this is close):
All the assment marks are ranked from 1st to last. eg. say you got 91 which places you third. Your mark no longer matters (in the real system it does, but not much, in this simplified system it doesn't matter at all as we won't be taking the variance into account, just the distribution).
Everyone does their HSC. The exam marks are ranked. For your exam mark you get the mark that you got in your HSC exam (say you topped your school with 96). For your assessment mark you will get the mark of the third highest exam mark in your school (because that was your assessment rank). Say second highest was 93 and third highest was 92. So you would get 92 for your assessment mark.
For your final mark you take the average of your exam and assessment marks.
[(exam mark)+(assessment mark)]/2
= (96+92)/2
= 94
As I said, it doesn't work like this exactly, unless there are only one or two people because this does not take into account the variance (eg. top 2 assessment marks are 92 and 74, the difference is so large that the variance will have a significant effect).
I still don't understand the HSC scaling system 100%, but I understand it enough to know that it is a good system and whilst not perfect, you would have a hard time bettering it.