I would go with option #2.
That way parts can be inspected and having the block sonic checked, there's no worries in the future
#3 would be good also but giving it a once over before diving to far into would be great
When I was running those MP valve covers, right at the corner where the distribution sits would hit causing the gasket to not fit correct. I trimmed that corner down some and it help with the leaks. Fyi I was running the thick gel pro rubber gaskets
Just quoting what the gentleman said who built my trans brake transmission. You can't footbrake off of a transmission that is setup for a brake.
Your car works very , but removing the brake just might be the ticket alone