flight options: 90 minute transfer or 2:35 hrs in FRA?
 

Flying to FRA overnight and both options cost the same. However, after landing from a red-eye flight, I'd rather walk right into the next flight and get it over with rather than having to sit around and wait for a couple hours.

Lufthansa is generally on time so I don't think there the possibility of missing my connection due to flight delays is minimum. Would you do the 90 minute transfer or 2:35 or longer? Thanks! I should mention the second option in on Austrian so it could be interesting to take on my way to Vienna.

You have not stated the crucial information needed by others to help you answer your question.
How are you booking your flight to VIE from your initial airport?

If you are booking your flight to VIE as on reservation (single booking code) where FRA is just a layover airport the carrier added for THEIR convenience, then your concern about missing flight is unwarranted for two reasons.
1. If you booked the 90min connection flight, and you miss the connection to VIE because the flight to FRA is delayed, then the carrier is responsible for putting you on next available flight -- most likely the 2:35 version. Look at the flight schedule. Between Lufthansa and Austrian, there are hourly flights from FRA to VIE. Since you have previously mentioned 2:35 layover was ok except for the additional time at FRA, this should be acceptable as a most likely fall back.
2. If you booked the 90 min connection flight, you are giving yourself a chance to be on a flight starting with the 90 min one. If you booked the flight with 2:35 layover, you are foregoing a chance to take the 90 min connection flight. Why do you want to leave money on the table?

If, however, you are booking your flight to FRA under one booking, and FRA-VIE under another booking, you own the liability in making the connection. In this case even the 2:35 layover is not enough.

Yes, the booking would be to VIE on Lufthansa. I agree that it makes perfect sense to book the 90 min connection as I have nothing to lose in case of any unforeseen delays.

Come to think of it though, you've left out an important possibility. If the plane lands in FRA on time but I still miss the 90 minute connection due to long immigration lines at FRA in addition to security, it would not be their fault and I may have to rebook for a fee or even purchase a new ticket depending on my fare conditions!