I ride this area regulary. Not sure on its legality but I do know that in the last three years of riding through lake parramatta i have ridden past the odd ranger who hasn't said a thing other than hello.
Its a fairly popular venue and the council one would assume is well aware that the reserve is used for mountain biking and has been for a long time.
I also know that other trails that i ride in the area that come under Parramatta council are Ok to ride.