To look for an upside to the worst case scenario, the biggest win from a deep challenge to Section 230 protections would be a return to a smaller and more mindfully curated web. Many of the problems from social media are rooted in the idea of having such enormous hoards of content that the only way to trawl through it is with automated algorithms. This was great when it worked, but the content pool seems to grow fast…
Furthermore, distributing liability among your users is not a great idea. What will happen is that extortion enterprises will be created to sue people on our hypothetical old-web-of-trust. We know this because BitTorrent allowed Prenda Law to make porn, share it themselves to dox users[0], and then sue the people who downloaded or watched it. This scheme worked because copyright lawsuits are expensive to defend against, and defamation is no different. So everyone just quickly settled, which is why it took years for judges to catch onto this particular fraudster.
The only thing that keeps you from being sued for watching an infringing YouTube video is DMCA 512, which works almost[1] identically to CDA 230. Because it's a large centralized service, it's a juicier target, and people with legitimate copyright grievances can get things taken down from them. So nobody bothers to try and sue individual viewers.
Your #2 scenario only works if the Supreme Court is merciful and only kills recommendation systems. If CDA 230 is struck down entirely, you won't get to run a network-of-trust version of the web, because just hosting a public web server will require signing an indemnification agreement and posting a very large bond. In this scenario the Internet becomes more like cable, or perhaps a games console.
[0] Normally an IP address is not dox; but a lawyer and an out-of-order DMCA subpoena can turn it into dox.
[1] 512 adds a notice-and-takedown regime because Hollywood wanted censorship powers over the Internet.