Mosman Library run an incredible outreach program and have a fine track record in the online space. They put social networking tools like blogs, flickr and twitter to good use and have developed a standalone site, 'Mosman Memories' which acts as a space for "past and present residents of Mosman to share memories of their street." The site is part of the living history program that is run by the Library, and is in my opinion, a lovely example of online community engagement at the local level.
Check it out at:
Social Web