Im so sorry to hear about the leg. I just lost my lovebird and trust me i know the feeling of sleepless nights not knowing what to do. I always took my disabled lovebird Pin to the vet no matter what the world told me. I just feel so bad for thr bird you now have, i want to tell you by you taking in this bird your like an angle for him.
I would say you go option 2 bc then that way you can always see if its made a difference. To just have it cut off may always have you thinking. When my Pin was sick my vet told me to put her to sleep and i was so upset but my sister, mother and i said no! We wanted to try everything in our power. Pin had a massive overbite and later broke her leg which changed her life. Gosh life really changes when you have a pet. I was able to have 5 wonderful years with this bird.
But i wish you the best of luck hun.