I can't think of how you would safely shim a 1" quill stem to fit 1 1/8". I've never seen such a device.

So, I think the second option is your best (and safest) bet, paired with a +40 degree stem.

I've always admired those trek 9x0 lugged frames, but it's good to know that they have a weird headset. I avoid Fishers from the same era because of their 1 1/4" threadless headsets.

1" threadless isn't bad because it can be shimmed up. I did that with a drop bar conversion of a Univega Alpina for my girlfriend.