Yes the third digit '6' means a 1966, as you have guessed. The first digit '1' means Type 1 (Beetle). The second digit '9' means a fully Australian-manufactured car. This was only used 1965-68. German cars have a '1' as the second digit. US and UK websites don't usually recognise Australian-made numbers.
Look here for information on Australian Chassis Numbers:
http://www.clubvw.org.au/vwchassis
No information is available on Australian production records - what motor was fitted to what chassis etc, or specific dates. All lost many years ago. But as Phill says, the 'F' engine code is a 1300, introduced in Australia from 1966. The only way you'll get more info is if the car still has original papers or service records from new.
http://www.clubvw.org.au/vwengines