I have practiced to punish KL Tele with 1 to full combo. It rly helps in this MU. It's reactable.
Yes. Anti-airing him is key.
As UndeadJim mentioned, EX Gotcha in Pumped Up will beat out his orbiting hat spin for 22%.
Don't forget to uppercut in a pinch as well. If you can keep Kung Lao out of the air with Stand 1's, energy waves into OTG ground pounds, and uppercuts, half the battle is won.
I tend to use a lot of naked dash punches in this MU, either to catch him trying to jump in or escape his teleport if I feel I am not in position to poke him out of it. A little YOLO under most circumstances, but it works on Lao.
Basically, since I can't really zone or pressure him effectively, my goal is to keep the match in a constant state of neutral, where I feel I am advantaged.