シャープペンシルdoes not literally mean "sharp pencil" in Japanese. It means "mechanical pencil" (this is the term we use in the United States - I understand in England, they call it "propelling pencil" I am not sure what term you use in Australia!). Basically, it is a pencil that can be refilled with lead.
On the other hand, 鉛筆 refers specifically to traditional wood pencils that you sharpen with a pencil sharpener. :)
In addition where there is truly a choice between a kanji-based word and a katakana-based word (when both mean the same thing), the katakana-go almost always sounds more "modern."