Should I agree to review a paper that I do not fully understand?
I would go with 2, or at least contact the editor saying you would do 2, and asking if they'd prefer 1. There tends to be a shortage of referees, at least in my field, so I'd expect 2 to be preferred. I've been sent a paper to look at one aspect where someone else had apparently already checked a different aspect.

While I hate to say it, I believe in maths it would not really be expected that every tiny detail of a similar paper would be checked. I used to think it worked like that, but the time issues you mention are true for others too, so I guess 'certain enough' has to replace 'absolutely certain'.