Options for replacing an at-grade hose bibb
I would definitely be worried about remembering to drain the valve, and it's also a pain that you'd have to drain it inside. Your second option is pretty good though, otherwise. 



Another option, which is probably easier, would be to make up an adapter of sorts for the outside. Take a regular spigot, attach to a 90 degree elbow, and put a hose adapter on the bottom. Mount this to the outside of your house at a convenient height. Use a washing machine hose (or preferably something slightly bigger, eg: find or make a small female-female garden hose) and connect your existing sillcock to this new contraption. Leave the existing one on all the time. 

You could use CPVC if you paint it (to protect from ultraviolet) or any other material that is not going to break down when exposed to sunlight. The key is that you can disconnect and drain it. If you do end up installing a frost-free sillcock, you can winterize it by simply shutting off the sillcock and disconnecting the hose.