I’ve actually just written a plugin that manages option 2 just fine. Except instead of renaming the file when the folder is renamed, I do the opposite: rename the folder when the file is renamed. (I also have a lot of extra code to manage locking around the UI and link updating, as that was indeed difficult.)
The reason I chose to match the folder name to the file instead of the other way around is that it’s much easier to rename a note than a folder: it has a title bar and an F2 button. You can also easily move a note anywhere with the “Move file” command with just a few keystrokes. For my workflow, it works much better – I hate using the mouse for things I don’t have to, and I try not to use Obsidian’s file manager at all. This workflow lets me do everything from the keyboard in the context of the note. (Also, rather than creating folders and then wanting to have notes in them, I usually go the other way: I have a note and now I want it to be a folder.)
Anyway, it would be nice if the two plugins could be used together, e.g. if yours had a setting to let the user handle renames and not do any automatic renaming. With that setting, people could use my autorename plugin for the actual file/folder management, and yours for the file manager UI and other features. (Which I’d prefer not to reimplement in mine.)