Excellent suggestion, I didn’t even think about testing the setup using a VM as you suggested.
I also lean to option 1, as it is just the simplest. There is conflicting information out there regarding proxmox and the VMs being on the same disk: some people say it’s fine, others hate it (although I couldn’t quite figure out why, hence the question).
The biggest downside is storage space, but I don’t think I’ll need all too much since I’m currently running everything on about about 500GB and of those only using 70GB.