I honestly like the way the third option would work but there's a downside they can get hella hard to kill real quick I know the ciscos pack does it and like 100 blocks away from spawn they can get strong enough to one shot netherite armor.
So I have an idea add a stat point tree allow people to also increase there stats as well I don't think it'd have to be very big but you end up traveling like tens of thousands of blocks for some structures so it'd be next to impossible once you get far enough out y'know?