I'll go with option 2.
I believe the best villain would go to:
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Ever since the beginning of the series, Orochimaru was the most cynical and intelligent out of all the villains. When he was introduced in part I, Orochimaru made his frightening appearance by melting the face off a few shinobi to perpetrate the young Sasuke Uchiha. When he appeared at first he was very creepy and engaging, at this time Orochimaru being the villain drawn more attention to the series. During the chuunin exams, Orochimaru managed to scare the shit out of Kakashi to where Kakashi wouldn't dare to make a move. Note when Kakashi fought other villains in the series no one terrified him much as Orochimaru did. And yes, Kakashi had the Mangekyou Sharingan in Part I, but didn't start using it until Part II.
As for his villainy tactics, Orochimaru takes the prize. He is very
Persistent to achieve his goals unlike every other villain. With Itachi slicing off his hand, that didn't stop him completely for his aspiration to claim an Uchiha's body. He continued to persist further. From injecting Hashirama's DNA into 60 babies to claiming the bodies of his victims for immortal purposes, Orochimaru takes the cake.
The Akatsuki may had gathered the Bijuus, but Orochimaru ignored the huge masses of chakra and wanted Sasuke's body. Utilizing his expertise in the shinobi world and vigorous research he managed to outsmart Tobi, cheat death plenty of times by dwelling within the curse seals of his experiments and also being revived by Sasuke. Orochimaru takes the
"impossible" in the shinobi world to possible lengths. No one would ever thought that he could trick the death god twice and also live on past from being stabbed by the sword of totsuka.
I could write a twenty page paper on Orochimaru. But he is driven by the hatred of death itself. Unlike other villains who just want to conquer and get their revenge.