True to the name, the LCCT terminal is pretty barebones and has little of interest. It's also operating at way over capacity and will be replaced by the new, larger "KLIA2" in April 2013.
Sterile transfer is not possible at LCCT: you will have to enter Malaysia through Immigration, collect your bags, check them back in, and pass through exit immigration to catch your next flight. As an Australian, you will get a visa on arrival with no questions asked, but the rigmarole is still time-consuming and, depending on how jammed the terminal is, this alone can very easily chew up two hours. Edit: Apparently sterile transfer is now possible, if and only if you already have your onward boarding pass. AirAsia has a handy "Fly-Thru" page about this.
If you want to grab a bite to eat, do so while landside, where the options are (slightly) better and cheaper. The Plaza Premium Lounge is RM88/person for two hours, which is unlikely to be worth it unless you really need a shower or a PC with Internet access.