Midweek, mid-December. LHR Virgin > LAX Delta > SYD - economy unfortunately so wouldn't be first off the plane. One ticket, arriving into LAX early evening.
The layover is 2h 10m in LAX. One - is this (routinely) a do-able connection? We would have checked bags, and I seem to remember you have to pick them up at LAX and re-drop them.
We don't absolutely have to be in Sydney on time (we have 4 days before a cruise) but I'm concerned about the potential lack of alternative flights to be rebooked to if we misconnect versus if we were going via HK/SIN etc... particularly at that time of the year where there might be increased Christmas travel - should I be?
If your inbound is on time, you should be OK. Yes, there is no international to international luggage transfer at LAX, so you will have to take your bags through US customs and drop them off at the recheck desk after exiting the customs hall. If backup flights are important on an LHR-LAX-SYD itinerary, have you considered
oneworld? Both AA and BA fly between London and Los Angeles and AA and Qantas fly between LAX and Sydney.