In many cases there isn't even an argument to be made for #2 many traditional songs have already been altered in countless ways by performers who came before.
Reverance KILLS. "Anything that cannot be imitated perfect must die" - Bob "the birthday Boy" Dylan. Don't put the music in some sacred untouchable shrine. It is a disservice to the form.
What is the worst that can happen- someone butchers a song, If the older version is good it will survive the transgression. If the transgression is good the tradition grows.