Well, if you feel you need an encrypted backup, I would do option 1 first.
If that doesnt' work, then I'd do option 2.
And no, it's not impossible to boot from USB - that information isn't correct.
With an Intel Mac you can restore in full, including the OS. With Apple silicon you would need to clean install the OS and restore when prompted to do so during first boot.
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--Dave Nanian
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