Usually the city where you apply for the visa (your city of residence), is where the partner visa will be processed. However, if they want to process it somewhere else (eg: Melbourne, Sydney...) they will forward the application there themselves. You will never be made to travel to a different city to put in your application - just go to your nearest office
I'm not sure about the PMV, but the partner visas are not capped, thankfully. They just get so many applications that for each new once to even be looking at it takes a long time
I feel your pain
All the best.