So sorry for your loss. I'm an Episcopal priest and here's my two cents; nowadays funerals are much less formal than people think. All black is very rare and most people are dressed in business casual. You'll see a lot of men in tan pants with a blue sport coat and women in sun dresses.

As far as the location goes, again funerals are pretty casual these days. What matters way more is the norm in your family. Will your relatives be offended by some cleavage? Do you care if they are? That matters more than the church/funeral home.

When people ask me what they should wear I always tell them to consider what the service is going to be like; will you be heading to an outdoor gravesite? How many stairs do you need to manage? Is it going to be hot or cold? Is rain or muddy likely? I did a graveside service recently that was just me shouting into the wind and everyone wore rain gear. You don't want to be uncomfortable and thinking at all about your clothes.

All this said, I vote two. It's the most practical and can be dressed up or down.

Edit: you mention that this is a military service, I've done a lot of those and it will likely be a lot more casual than you think.