I lived in the area from 1987-1999 and saw Traralgon grow from a somewhat seedy town to the economic centre of the Latrobe Valley in that time. Even invested in property at the ripe old age of 22! (Out of it now...)
If I was to look in Gippsland again, I would stick to Drouin/Warragul (train makes Melbourne reachable), Traralgon (economic centre of the region) or Sale (no specific reason, except that it's "big enough"!)
I can remember back in the early 90's when you could buy a house in Morwell for about $35,000. Well, now you're looking at about $85,000! Not spectacular growth!! The privatisation of the SEC killed Morwell and to a lesser extent Moe, in my opinion.
But it depends on what you're looking for. If you want cashflow, you could look at the smaller towns like Yallourn North, Heyfield, etc, maybe Churchill (especially student accommodation) but IMHO the 3 mentioned earlier is where any growth will be.
Hope that helps.