You can't expect your friends to keep sweet talking to you. Sometimes, some people just need to know the blunt truth. In this case, I see some value in the advice.
This person is his boss, not his friend--that's an important distinction here.
On the second note about employer should only talk about work, I disagree. It's sometimes a good strategy to build good rapport with your employee by showing concern in their life and what's happening.
It's fine to have small talk with the people that work for you--in fact its a good idea. As a boss though, one has to be careful about what is discussed. The conversation the OP described was not small talk. It was a put-down based upon a condition the employee has no control over, that the employer knew about prior to his employment, and which the employee has made a reasonable accomodation for. Seriously, the courts are full of lawsuits based upon what the employer considered "small talk" at the time.
Would this be different if his boss offered him a gym membership and/or a company car pool instead?
Yes, it would be. Instead the thread would be entitled, "My boss gave me a car!!" The conversation the OP had with his boss is not similar to this.
As I say, I can't judge much from the limited information, but we shouldn't jump the gun and threaten to sue immediately just because someone say "You are fat"
I'm assuming that everything the OP is saying is accurate--I recognize that it might not be. I was not one of the people to suggest he lawyer up--but what his boss told him is very concerning and the OP was clearly upset. In preparation for what could be some very unpleasant events for him, he should be aware of what his rights are in Australia.
As for the "You are fat" situation that is most definately not a conversation you would want to have with someone who works for or with you--trust me.

As a general rule, its better to focus on the behavior of an individual. There are several obese people I supervise but its not my place to tell someone to lose weight.
However, let's say the obesity is somehow affecting a person's job performance--say they weren't getting enough sleep and started coming into work late. I would have a conversation with the person about their tardiness and would not mention their weight problem at all. If the employee brings that up themselves and states that as a reason for their tardiness, then HR gets involved because its a health issue that may require some type of special accommodation or disability leave.
I was once in a courtroom where a "Thank You card was entered as evidence. Inside was written, "Good Job" and the employee felt that comment contradicted the reasons for her termination. It's sad.