I don't see how the 1st option is troublesome. I think a multiverse is preferable to a biverse both on a story and scientific level. The Amberverses wouldn't have necessarily been created by the machine. They could have always existed and Peter merely "popped" into one of them. When the September mentions that he and the other Observers can witness different timelines I'm assuming he means different universes.
I don't think option 1 would necessarily sour the viewing experience. One could argue season 4 helps further develop Peter's character and assuming he still has his memories, there would be a lot of new information to share when he gets back home. I actually personally prefer the former situation to the latter. I think the plot could get too messy if we're still in the Blue universe and characters get folded in upon themselves.(1) If Peter simply "goes home", what happens to the Olivia, Walter, Astrid, Nina and Lincoln we all know? Do they cease to exist? Do all the adventures they've had in season 4 just not matter any more? Nothing like the feeling of "nothing you just watched actually happened or matters" to sour a viewing experience.
(2) If we are still in the Blue universe, what happens when the "prime" timeline is restored? Will the above characters be folded together with their new-timeline identities; meaning Olivia was both raised and not raised by Nina (etc) -- much like she is now? That means that these characters will all have fake memories in their heads like hers, or have the old memories overwritten, which is problematic, identity-wise, but doesn't sour the viewer as much as option (1).
If we are indeed still in the Blue universe, another possibility (although I think unlikely) would be the characters simply revert back to their old selves with no memories of what happened in season 4. There's also the possibility that when Peter returns home he is returned to the exact moment he left.
What I hope happens is that Peter leaves the Amberverses and returns to the Blue universe with the appropriate passage of time. That way we could have one episode that kinda goes back and shows what Olivia and the gang were doing while Peter was in the Amberverses (sort of like that episode of Lost all about the tail section)
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