If you have an intricate center design, the latter is probably the best way. If you have an all-over pattern, you could do #1 without any concern. #1 is the way most of my earlier quilts have been done. Recently I've taken to piecing my backs almost as much as my fronts to make the quilt reversible.
How much time and energy do you wish to spend on this? A third method would be to use the "John Flynn" method of slicing the 45" pieces on the diagonal, then sliding down the two pieces down the bias to make a fatter rectangle. That method won't work with the size constraints of your project.