1..Two OUT, maybe from IN AND OUT (SNOUT = Cigarette,Fag)..
She had a Fag and a chat, clamed down and was over it.
2.. Two Out, maybe just like we do today, take Two minutes out (have a break from the thing we are doing)..
3.. Maybe a combination of both, TWO MINUTES FOR A FAG,,
lots of cockney has multiple slang for the same word, but it is strange that TWO OUT has not been made more common by the fact that it was used in a popular song,
When I was growing up we called them"Salmon"(Salmon and trout)=Snout.
or "Oily rags" = FAGS,,
They do both have more of a ring to them,,