As someone going through roughly the same issue, you'll need to know exactly how much was removed from the block surface to chose the appropriately sized headgasket. Or you'll need to install your headgasket of choice, obtain adjustable cam gears, and degree your cams assuming the piston doesn't make contact with the head.
I'd go with option 1. Unfortunately I don't have experience with this, I'm not sure where you'd need to base your measurements off of.
