The smith is basically junk. The things that people perceive as it's advantages are actually its weaknesses. Stabilizing the weight and forcing the plane of motion one moves it through are RISKS, not benefits.
Anyone who's reasonably healthy should be capable of lifting free weights safely if they just learn a bit about the technique, I think the whole safety argument either comes from ignorance or is a complete cop-out and rationalization to avoid the harder free weight counterparts.
I could go on and on, so I will. Some people say squatting in the smith is safer, but nothing could be further from the truth. For one, the body is going to need to move fore and aft during the movement to keep the bar where it needs to be relative to the specific part of the ROM the lifter is at. On the smith your posture must conform to the smith's track. Tpically this causes one to put their feet out. This places nearly all the transitional force of the squat on the knees rather than the hips, which bear the brunt of the squat when done properly and are better equipped to handle the load.
Also, being able to bail ot of a lift by twisting the bar and hooking it is much tougher than it looks (I know this from past experience

). You're better off just using a power rack and setting the pins appropriately. I've bombed on heavy squat singles all by myself and suffered no ill affects beyond the blow to my ego.
Finally, if you get strong on the smith you create some nasty strength imbalances. When the weight is stabilized for you, the body does not have to cope with balancing it. Balancing the weight throught its ROM is an essential element to any exercise. The guy who smith squats is practically asking for injury in any situation in real life where strength is required. Those big beefy quads are gonna be pretty useless when his low back is weak as a third-grader's from being spared of supporting the forces of an unstablilized load over his back. As the saying goes, you're only as strong as your weakest link. I realize that many are strictly in the gym for vanity and care nothing about strength, but it's hard to get big when yu're injured.
Forgot the smith and go with option 2.