The finishing touches are being put on the new Ulumbarra Theatre, which opens to the public on Friday with a community gala.

Bendigo is no stranger to theatrical reinvention. On the bus from the city's train station, you pass Rosalind Park. At the height of the gold rush, it was a 24-hectare tangle of mine shafts, puddling mills and mullock heaps. After being acquired by authorities in 1861, it was remade into tranquil parkland and sculpted gardens, named after the heroine of Shakespeare's As You Like It.

Ulumbarra Theatre is a redevelopment of the heritage-listed Sandhurst Gaol, which opened in 1863 and operated until 2004. It is arguably the best-preserved Pentonville-style prison in Victoria, built according to Jeremy Bentham's panopticon model, with room for five narrow wings of cells branching from a central chamber.

Red brick guard towers and an imposing facade of Harcourt granite frame the new entrance: an unobtrusively paved incline flanked by Romanesque arches matching the original brickwork. Inside, the box office sits under a wrought iron gantry, from which three inmates were hanged for murder before 1897; an incentive to pay for your ticket, if any were needed.

The Ulumbarra Theatre consists of a 953-seat auditorium, with a 14.5-metre proscenium arch stage, orchestra pit and fly tower, viewed from gently raked stalls and dress circle.

"Ulumbarra" comes from the Dja Dja Wurrung language. It means "meeting place" or "gathering together". An Indigenous smoking ceremony was held this week to rid the building of unquiet spirits and acknowledge its history of suffering.

Given the theatre's criminal past, Ulumbarra is the perfect place for the world premiere of Ned: A New Australian Musical, based on the life of outlaw and folk hero Ned Kelly. Composed by Adam Lyon, who played Carl Denham in King Kong and is himself from Bendigo, a sneak preview of the show revealed an Irish folk meets Les Miserables feel, with rousing numbers including Such Is Life.

The role of Ned will be played by Nelson Gardner, also a Bendigo boy, who has appeared in The Producers and Chess for The Production Company since he graduated from Victorian College of the Arts (VCA). He now sports a full beard to play Australia's most notorious son.

"I'm stuck with the beard, the way [Games of Thrones star] Kit Harington is stuck with Jon Snow's hair," he laughs. "Lucky for me the 19th century look is in at the moment."

Gardner was measured for his character's armour a couple of weeks ago. "It's not far off being a replica of the original, and weighs something like 40 kilos. I don't sing wearing the helmet, obviously."

He has been researching the Kelly gang in preparation. "There's heaps of cool stuff you don't often hear about – like Ned's personal and family life – which the show addresses. He was a criminal, yes, but he was just a boy really. He was 25 when he died. It's a very human story. I think my favourite detail is that when he was being escorted to be hanged, Ned commented on how lovely the garden was."

Gardner is excited to be performing the show at a converted prison, and agrees the building's ambience couldn't be more suitable for the Kelly gang to ride again. He is also hopeful the Bendigo season will lead to another in the big smoke.

Certainly, the opportunity for out-of-town trials with a form as complex and demanding as an original musical might breathe new life into the Australian musical theatre scene. It may be gilding the lily to imagine Bendigo as the new "off-Broadway", as Kathryn Mackenzie, of Bendigo Tourism, would have it, but the idea behind it isn't at all silly.

In any event, the 953-seat theatre should prove a vital piece of infrastructure for touring productions – especially musicals, opera and dance – which have been known to bypass Bendigo for want of space.

As well as Ned, Ulumbarra's heavily booked inaugural program includes a cosmopolitan range of performances – from Russian ballet to Wesley Enoch's production of Black Diggers – for the city's 100,000 residents to enjoy.

Ned - A New Australian Musical opens on May 22.