Option 1. You already know it is the best way. You are only asking us to test our faith.
I have a 1991 rigid Kona (8-speed cassette and canti brakes) and two newer MTBs (both hardtails, one V-brake and one hydraulic disc). I am allowed that many because I have children who steal them. They cover about 25 years of MTB evolution between them and all are excellent in their own way.
The Kona is the closest to your GT, although maybe my aluminium V-Braked Trek (Circa 2000) is also similar. Both would be daft with discs or other flashy parts.
If you take this lovely old jewel into the world of disc brakes, you will regret it. They are better, but you also lose a lot by fitting them. Stay with the V-brake set-up!
This is a tool for smashing over the ground. Spend enough to keep it pure, keep it simple and keep it strong.