I would think option two would require some re-work of your shock (re-valving and/or re-springing) as the ride characteristics would change due to the increased forces applied by the longer swing arm.
Theoritically, to determine the effect on ground clearance with a 50mm extension you could measure from the center of the final drive to the ground, and then run a straight edge from the center of swing arm pivot point through the center of the final drive and measure 50mm beyond the final drive center the distance from the bottom of the straight edge to the ground.
take the difference between the first and second measurements and that would be the increase in ground clearance.
"punkrocks what it's all about" - J. Strummer
Originally Posted by Stagehand
your bike is suitably dirty. Well done.