You are correct, go with your second option. Chroma Upscaling is more important than the chroma algorithm quality in image upscaling but it is still not something to spend too much GPU power on.
I like NGU med or high for chroma upscaling but only if the luma quality in image upscaling is already on very high.
NGU is great for HD anime but it is too sharp for SD anime, IMO, it shows all the artifacts and oddities too well. NNEDI3 does better with SD anime.