Option 2.
Mussina was one of the best pitchers of the steroid-era, and the best Oriole's pitcher not named Jim Palmer.
He had more bWAR as an Oriole than a Yankee.
Other HOF players who split between other teams have their numbers retired by multiple organizations. Frank Robinson, Nolan Ryan, Greg Maddux to name a few.
I think the O's should retire it, but continue to let Adley wear it as long as he's an Oriole (similar to Mariano Rivera wearing 42 after it was retired throughout baseball). If Adley puts up a HOF career, then two #35's can be hanging over the left field seats.
But, it's ultimately the O's decision, and it doesn't matter to me if they decide to not retire it.