I have used mini PCs as a servers for years with file serving being a major duty of them. Granted my storage needs aren’t excessive, but most NUCs or Nuc-likes can hold two drives, some can have a third if you include 2.5" drives. My AsRock A300 can hold 4 drives (two of each), but its m.2 support sucks so that’s not as much of a boon as it sounds. If you need significant storage, there is no replacement for something that can hold 3.5" drives though since those can now reach 20+ GB a drive.

I go with scenario 1 because it radically reduces the ways I can screw things up for myself.

I’ve used a bunch of different solutions over the years, but currently I just run Gerbera and it streams my local library to my TVs because of the sheer ease. It’s not perfect, fast forward and rewind can be iffy to get working with some configurations, but otherwise it has been a smooth experience.