What is the best way to align with centerline on final, rudder or slip?
Your method #2 is consistent with current FAA doctrine, and when practiced yields acceptable results.

Rudder for longitudinal axis alignment (parallel) with the centerline.

Aileron for drift.

Have a stable approach, and maintain vigilance of both inputs when on low final.  If you practice the technique for your entire final approach, you get extra practice time, and may master the technique faster.

FAA has a publication, On Landings I  (and also a II and III publication) which are all great at describing the technique.  Every student should have a copy for review.  FAA-8740-48  a copy is here: https://www.flyingd.net/documents/on-landings-part-i.pdf

To answer a comment...if you are left of the centerline, and there is no wind, and your approach is stable, then you need some right aileron to get your longitudinal axis over the centerline, and you will have to adjust your rudder while maneuvering, to keep the longitudinal axis aligned and at least parallel to the centerline.

Drift with aileron, alignment with rudder. Constantly modifying input to get the desired drift and alignment. 

Aileron for drift.

Rudder for alignment.

Pitch for airspeed.

Power for altitude.