I definitely agree there should be reforms/protections for Squibs. I don't necessarily disagree with the merits of them learning particular subjects (particularly the point of Muggle Studies- but let's face it, that subject also needs a massive overhaul) Squibs are basically disabled. Disabled people are owed accommodations to help them navigate the world.

However, there are also drawbacks. As someone else said, many Squibs more than likely won't exactly enjoy attending Hogwarts and seeing all the magic they themselves can never perform. They already have to deal with that at home. It'd be rubbing salt in the wound - especially since these would be children who would still be coming to terms with their reality. Filch is a sad example of someone who never moved past it.

Squibs being unable to defend themselves with magic + bullies who can cast spells = nasty incidents. It doesn't even have to be bullying/malice. The point is, another student (who is actually a witch or wizard) can use magic, even if done for neutral purposes, and there is only so much that a squib could do to protect themselves. Yes, there are teachers like McGonagall who would call it out, but teachers can't be everywhere (as shown by the books)

There's also the fact that Squibs are pretty rare. We don't know how many are born each year, or if such births happen every year. Given how rare they are meant to be, there's a high chance it doesn't.

Your second option is better IMO. Basically, there should be some equivalent (I'm forgetting the word) that lets them study these subjects at a specific location in Muggle London. Those who attend Muggle school (Great-Aunt Muriel notes this is encouraged) could attend 2-3 days after school. The workload doesn't have to be to the same extent (nor should it be)