If you dig down you will find your foundations are only a couple of feet thick and your stumps are the same depth. So all houses in that era relied on stable moisture in the clay. As Melbourne has been drying out for 15 years houses are shifting about a bit. My advice is live with it. Square things up and we have a prellonged wet spell and it will move again. On your choice of floor, I would go for the bamboo floating floor, its clicklock with an insulation underlay. In the kitchen you glue the boards together. This closes the gaps between boards to stop water penetration. There is a display centre on Dandenong road Mulgrave area have a look in there. If you do lay that stuff give me a buzz there are tricks to it.