In my opinion, with Option 1 you don’t gain much compared to just watching the three/four relevant episodes back to back (unless you’re planning to do something particularly unusual with them) but you would lose the newsreel intros which connect the episodes together. Option 2 would have the advantage of giving you a wider variety of material to work with to lessen that episodic feeling, while also condensing the series down to an even more watchable form (but is of course much more difficult to do!).

Personally I’ve wanted to make two 3 or 3.5 hour movies out of the series, dealing primarily with Maul and Ahsoka’s stories, culminating in a ROTS and Siege of Mandalore mashup, but I’ve never actually made any real progress towards this since I’ve already got unfinished edits of all the other movies sat on my hard drive, crying out for me to eventually finish them…