Hi A,
Sorry for the delay getting to this.
Option 1 would work fine, though it might not be the cheapest way. Extension fares are just the zone 1 fares for the journey, except if you use both NR and LU you won’t be charged the mixed mode premium.
Option 2 would indeed require changing trains. The best place might actually be Vauxhall because it’s dual zoned 1/2 and a smaller station than Clapham Junction. You can either get back on the next NR train for Waterloo or use the Victoria line for Victoria depending on where your eventual destination is. You also have the option of walking between Battersea Park (2) and Battersea Power Station (1) if you want the Northern line.
You might actually be better off with just PAYG. If you only travel between Streatham Common and Clapham Junction on some days then you won’t cap then. Otherwise your journeys will count towards the zone 2-3 weekly cap with extensions for zone 1. At weekends your daily journeys will cap at zone 1-2 whilst still contributing towards the zone 2-3 weekly cap. You might like to try that out for a week or so and see how you get on. Feel free to copy a weeks journey history here so I can comment on how it was worked out.