My dictionaries, etymological and otherwise, just say that "lulu" is a derivative of Louis/Louise/Louisa. Webster's Unabridged adds an interesting definition:

A tax-free allowance granted to some members of the legislative body in certain States, usually in recognition of a legislator's seniority, position as head of an important committee, etc, [or] such an allowance granted by a governor to a legislator in return for a political favor.

Webster's attributes this definition to a special use of the general slang term for a remarkable thing.

Webster's spells lalapalooza, "lolapalooza," and offers "[?]" for origin.