I'd go for somewhere between 1 and 2, myself. I like the idea of moving the setting forward, but I wouldn't mind seeing occasional (or even frequent) sidebars along the lines of "If you're still playing Freeport in its original state, ignore the changes to X and Y, and make additional changes to A and B as follows..."
It's extra work, I know, but I think it would produce the best and most widely useful product that way.
While I like a lot about the True20 system, I think making Freeport into that system would be a mistake. It's still one of the iconic tihrd-party D20/D&D systems, and my experience suggests that most people use it as such. On a practical level, making it True20 makes it useful to fewer people. On a marketing level, I can't help but feel that you'd lose far more customers than you'd gain through such a move.
Obviously, I have no hard facts to back any of that up, but it's what instinct and (what I feel to be) logical reasoning would suggest.
Now, an online conversion for using Freeport in True20 might not be a bad idea, but again, we're getting into the "Lots of extra work" ballpark there.
So, my vote: Option 2, with sidebars and suggestions for leaning toward Option 1.