Green’s Dictionary of Slang

worthless, useless.

1882		Manchester Eve. News 4 Nov. 4/4: Tug Wilson is a better man than Oscar Wilde [...] but lally-gag society prefers to hang on the lips and toy with the back hair of Oscar.
1904		McCook Trib. (NE) 8 Jan. 8/1: The boys had to quit shelling [...] because their lallygag duplicator would not work.