Absolutely the first option was less bad. The Bulgarians were not Pechenegs in terms of destructiveness, once conquered they kept revolting anyway, and the troops they provided proved unreliable over and over again.
Bulgaria that survived would have to deal with the Pechenegs, Hungarians and Normans themselves, so it wouldn't always be an automatic enemy.
I also suggested it because it's more interesting as a POD than the old "Manzikert" option.
It's interesting, but . . .
If they kept revolting, why did the empire hold on to the area for a century and a half? (Admittedly with the first revolt I can think of barely a generation after the Bulgarslayer)
And the Bulgarian Empire is a formidable-enough opponent that "What if Basil just pretends Bulgaria isn't a problem?" doesn't really work.
Bulgaria as a vassal is just as likely to revolt as Bulgaria as a province, probably more so (Serbia comes to mind as an example, and the Bulgarian Empire is
considerably harder to make submit than Serbia alone).
I'm not an expert on the issue (of the Balkans), but if you're going to assert "absolutely less bad", I would love to see this sourced and given details.