Standard practice when merging papers on arxiv
Option 1 should be fine if you add appropriate comments and withdraw old papers.

Here is how we did it recently:


http://arxiv.org/abs/1503.04963 (merger)
http://arxiv.org/abs/1412.2109 (withdrawn)
http://arxiv.org/abs/1412.2667 (withdrawn)


In the merged paper, it is important to add a comment; otherwise you will probably trigger https://arxiv.org/help/overlap