Actually I have been using number two quite a bit but not for cable, but for AVX1. It works very well but its a bit out of sync because it takes you a little while to get VLC going, in my case usually more than the quoted 10 seconds. The quoted module doesn't work yet.
But you might consider a third alternative -- my Dell computer monitor has PIP, use the Svideo drive output from the cable box and just drive the PIP.
Boat name: Summer Compromise; Power train: twin 490 HP (w ATI Prochargers); A/V: sufficient