Just to clarify a few comments.
If the PM cant chair the NSC, then the next most senior Minister must in the order of Ministerial precedence. In this case, it is the Deputy PM. The portfolio held has no bearing on chairing a meeting such as this hence Faulkner not in consideration.
Secondly, the PM's COS can attend the meeting. He's entitled to. But he should sit in the bleachers as an observer, not at the table as a deputy (otherwise known as proxy). He is not emplowered to make decisions as part of the NSC as he is not a member of Cabinet.
In this case, the PM was late or absent and it appears his COS sat at the table as a "member" of the NSC, notwithstanding Gillard would be the chair. Herein is the fatal flaw.