Ignoring contradicting to accept Option 1 is strange to me, can't we do the same and say Option 2 is fine and ignore the contradictions there? Why is it alright to say that it can't be speed since people can get out of restraints. But not okay to say that it cannot be teleporting because people have made actions during this time?
Such as Naruto using the jutsu to save people, which isn't possible with the option 1 above. Since he cannot teleport to replace himself, but also move and grab people.
In fact this picture alone basically shows teleporting not being possible. Naruto has moved Inari out of the way,
but the log doesn't appeared until later. And we can see speed lines to show that motion was taking place, that Inari was suddenly pushed away.
He even grabs the mother as he is passing by. So unless Naruto made multiple rapid teleportation in quick succession. I don't see why we have to make up an ability. The move is never stated to be teleporting, and is something people are making up in order to explain an inconsistency that is them escaping holds.
Which can just be ignored and not explained, they somehow escape holds as well. The entire jutsu itself is filled with PIS, trying to make it teleportation is actually just a bad move all together. Because nothing in universe ever makes it be teleporting, just that there are moments where the substitution doesn't make sense.
Which should just be treated as PIS. We should not be trying to find some work around by making it a different power in order to explain the PIS away. The move even in recent stuff is still explained as high speed movement, not teleportation or space manipulation. (Which is something we're making up because we don't understand the move)
Sasuke literally got an ability that was the Substitution Jutsu, but it was actual teleporting instead of movement.
Until someone actually explains away KingTempest reasons above, I don't see how Option 1 be accepted.