What do you mean by hoes functioning as a dagger in combat? I think making the hoes a weapon is a better choice than adding a whole new weapon that would do the same.
That's what I mean.
Basically, if you choose option 2, you're choosing to make hoes realistically weak, but not too weak. If you choose option 1, you're choosing to make them about as powerful as axes (i.e. a viable alternative to swords)
EDIT: Also, 15w35a "balance" changes are confusing me. Are they trying to make hoes/shovels/picks viable or not?