Option 2 is one, I wouldn't mind at all tbh.
Kaido still got that WSC and 1on1 King hype. He showed literally nothing up until now. It's like judging Luccis strength based on seeing his full leopard form and him performing a Shigan in base. Just to put things into perspective.
If Kaido really turns into a creature that defies in verse logic because of his incredible power, I wouldn't mind Luffy teaming up with someone/with others. It would probably make it even more believable tbh.
The thing is, Luffy still has completely obvious, major PUs incoming, namely awakening and advanced CoC.
So if Oda now give us a more believable team up fight and later on makes it clear via one of those future power ups, that he would now be able to solo Kaido, everyone would benefit from it and every party would be fine.
Option 1 is still a tough one. I mean it's nearly a no brainer that Luffy has everything he needs in order to beat dragon and base Kaido.
But I don't necessarily believe that this will be enough for the real deal. And working towards a mid battle PU is a difficult task if every next attack can one shot you.
That "willpower/endurance" - route Oda went with during the Kuri fight, can hardly be applied onto the Kaido fight.
So Luffy's either already strong enough to do it or we get a fight that most likely stinks of plot armour tbh.
A mid battle PU can be received much easier tho, with the help of someone like Law, who can shamble you out of knockout situations, which would take me back to option 2.
I wouldn't rule out option 1 completely, but I definitely got my doubts.