Relegation/Promotion would be awesome. You'd limit squads to about 15, so First Grade clubs wouldn't overload, and loyalty within the Division 2 clubs would be rewarded. If it was to be brought in, you'd say the bottom two teams of the Bannerman Shield that season are relegated, and you'd introduce four new teams straight into Division 2. From then on, top two in Div 2 and bottom two in Div 1 are promoted/relegated. However, Australian sporting culture is not very adaptive to such a system (unlike the UK). Reggies is also an issue. You'd have to have two generic clubs play the Reggies game each round.
Bottom placed goes straight down. First place goes straight up from Division 2. Second last (div 1) vs Second (div 2) in a play-off for Division one.
The problem is though, there is no incentive for good palyers who came through the youth system in division 2 to stay with that team if they came 3rd. I dont think it would work really.
Division 2 would almost be like ALC, which is almost entirely pointless. Division 2 essentially becomes Ged's development league idea.