With the deputy, Anne Flanagan, this week anointed acting director, the pressure is off - for the time being - to appoint a permanent head. The move means the trustees and the state government can dig themselves out of a hole created when word filtered shortly before the long-serving Capon left the building in December that his replacement was poised to be announced.

Speculation mounted that Dr Timothy Potts, the director of the Fitzwilliam Museum in Cambridge, would be appointed. But the possibility of Potts at the helm had some in the arts world scratching their heads. Why would Potts - fresh from his coup of convincing the Louvre to lend Vermeer's masterpiece The Lacemaker - want to come to the Art Gallery of NSW? He is a former director of the National Gallery of Victoria, a more prestigious institution with the nation's most significant European art collection.

But it appears the ink was not dry and the move to appoint a new head unravelled. Whether money was a sticking point or an offer was withdrawn is unclear.

No one doubts that Capon, with his combination of scholarship and showmanship, is a hard act to follow. But the National Gallery of Victoria, which is also seeking a new director, adds another element to the trustees' already difficult task. Australia is in the rare position of seeking directors for two major public galleries - and potentially fishing from the same talent pool.

While the National Gallery of Victoria is expected to announce within days a replacement for its outgoing director, Dr Gerard Vaughan, who will leave mid-year, Sydney appears to gave gone back to the drawing board. The president of the NSW gallery's trustees, Steven Lowy, says there are no plans to re-advertise the position - for which applications closed last October - but acknowledges that names continue to be added to the shortlist and the process is ''fluid''.

The stewardship of the state's premier cultural institution is a key role, and one that also helps define and reflect its character. But appointing a new director is a delicate process and one that can go spectacularly wrong, as happened at the National Gallery of Australia when it sought a replacement to Betty Churcher in the mid-1990s.

Then, a selection panel's recommendation was cast aside, candidates were alienated (including the respected Dr Michael Brand, who is now a frontrunner for Victoria), and eventually the accident-prone Dr Brian Kennedy was hired from Ireland.

Lowy heads the selection panel seeking Capon's replacement. The trustees will make a recommendation to the state government.

''I lead it, there's a selection committee to drive the process, but all the trustees are involved in the decision-making,'' Lowy says.

But who else is on the panel to help determine the directorship of the gallery - which receives $25 million a year of public funding - neither he nor the government will say. Nor will he or the government disclose the salary offered. It has previously stood at $240,000, well below the $385,000 paid to the director of the Queensland Art Gallery, Tony Ellwood.

Ellwood recently renewed his five-year contract with Queensland, which many interpreted as taking him out of the running for either Melbourne or Sydney. Yet with a state election called in Queensland, and the possible demise of the Bligh Government, the game may well have changed.

The talented Ellwood is the golden-haired boy of the fickle Australian art scene. But the opportunity to head a major gallery does not come up often - once every 33 years in the case of the Art Gallery of NSW. Some wonder what more Ellwood, a former deputy director of the National Gallery of Victoria, can achieve in Brisbane having overseen a series of high-profile exhibitions and the opening of the Gallery of Modern Art.

In Sydney, Flanagan's appointment means the trustees can further consider what is needed in a permanent director who may well have to oversee the creation of a new gallery building.

Some observers welcome a buffer period between Capon, who has left big shoes to fill, and a new permanent head. The Sydney gallery owner Rex Irwin argues for a high-profile but temporary international ''stocking-filler'' director.

''If we had an incredibly important and probably very old, all but retiring, international person for two years only … this might give the person who takes over from Edmund more of a chance than if he comes in and everybody says 'Oh, he's not as pretty as Edmund, as amusing as Edmund or as clever as Edmund','' Irwin says.

He suggests Sir Roy Strong, the eccentric former director of London's National Portrait Gallery, Neil MacGregor, director of the British Museum - should he care for a sabbatical - or expatriate former National Gallery of Victoria director Patrick McCaughey could fit the bill.

The artist and curator Bill Wright, a former assistant director of the Art Gallery of NSW, wants a director who will steer the gallery away from Asia and towards modernism and Western art.