I like 3 also. if you can’t get a good user experience privacy matters less because there are no users, and anyone can spin up a super privacy enhanced instance if they want.

I was thinking however that a super stand alone image server would be a great thing for Lemmy, and pixelfed and the Fediverse in general.

Imgur blew up and was the go to for image hosting on Reddit for years, until Reddit realized it was leaking traffic and users to them and started their own. But hosting images has a lot of potential headaches like copyright violations and big corps suing you into oblivion, in addition to inadvertently hosting illegal stuff. The Fediverse will need some good image hosting servers and video hosting servers as part of the plan in the long run though.