Myself I would go with #2. I would not drop the engine cradle down a little bit, I would tear that sucker out and toss it across the shop and out of my way. I would also go to Lone Star Tool and buy their OTC engine support bracket and support the engine. A tranmission jack would be nice with a big piece of foam to rest the trans on and one of those ratcheting band straps to strap it onto the head of the jack with. This is more or less how I do them in my shop and it works well, most of the techs that I know do them in a fairly similar fashion.
Mark
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