First, in the LBBs, there is no Identify spell, although it could be added. By default, magic-users know all the 1st level spells listed, including Detect Magic, so if the M-U doesn't prep that spell for an adventure, there's plenty of time to identify which objects are magical if it's brought back to home base. The same goes for Read Magic, which fully identifies scrolls and finds the magic words that trigger other items.
My assumption is that the standard way to identify what a magic item does, as opposed to merely discover whether it is magical or not, is to use the magic research rules. Equate the effect of a magic item to a spell (or spell level, at the very least.) Spend GP on research materials and texts, take at least one week per spell level equivalent, and you get a roll to discover the properties of the item.
If the roll is failed, you only discover some of the properties. There are three basic details about each spell-like power: trigger, target, and effect, in that order. For example, a Wand of Fireballs has:
- Trigger: gesture with wand and say magic word,
- Target: victim want is pointed towards,
- Effect: Fireball flies towards victim.
A crystal ball has:
- Trigger: look into crystal and say magic word, followed by name of what you looking for,
- Target: one remote location or individual,
- Effect: Clairvoyantly spy on target.
You should already know all the triggers via Read Magic before you even begin, but some items may have unusual triggers. On a failed roll, you discover one additional detail, or two if your level is twice the effective spell level -- but if the item has more than one power, you have to discover all the triggers first, then all the targets, then all the effects. If you already know all the triggers and targets but still fail a roll, you think you discover the effect, but you are wrong.
We can add an Identify spell, but there seems little point in making it take so long or drain the caster's vitality. Instead, the Identify spell identifies one detail, two if the caster's level is twice the equivalent spell level. This version of the Identify spell doesn't have any side effects, but it can only be cast once a week per item, so powerful magic items will still take a while to figure out; all you are avoiding is the research costs. This spell should probably be 2nd level, since it's an improvement on both Detect Magic and Read Magic.