Given the age of the old FP I'm not sure option 1) is viable. Option 2 is going to give you the most long term satisfaction and safety. But, you might have an option 3. That would be to pull the old FP, install new class A pipe in the chase and then put a nice freestanding, rear exit stove on the hearth connected with a short run of double-wall pipe. The current hearth would need an extension for ember protection at the floor level. A Woodstock Progress Hybrid might look nice there.