I use method 1 unless I have an awful lot of metal to cut out. I don't own a floating reamer holder, so I avoid cutting with the lathe unless I have to. I have had to lathe-ream a stainless steel barrel when I used a rental reamer that was not quite as sharp as it should have been, but I usually don't need to.
Actually, a hand-cut chamber, particularly in a barrel with a short-chamber already cut (as most of the barrels I buy have), will run very true if you take care to hold the barrel vertically while reaming. A reamer naturally centers itself in a hole.
As Z1r points out, you must allow .002" of crush in your fitting. I just cinch the barrel up, cut until the bolt closes with light pressure on a "Go" gauge, then remove the barrel and use a deburring tool to cut a 1/64" chamfer on the inside rim of the chamber. I reinstall the barrel, check with the "Go" gauge, and I am good to go. Beware of chips when checking the headspace. Also, know that a sharp reamer will cut a thousandth or so per turn and can cut a chamber too deep in a heartbeat. Go slow, check often, use lots of Rapid Tap, and clean the tapping fluid off your reamer after you use it. Oil it up with RemOil for storage.
Clemson