Hi,
1.
assign color and size as Characteristics to the product that is now an Option
Yes, that's what I'm saying. That way, you have only the style characteristic on the main product, and the color/size characteristics in the option. Note that you'll have almost the same situation than with the custom item fields: you'll need to configure different options for different products since they'll have different colors/sizes available. So I don't think that option 1 is necessarily better than option 2.
2. Yes, in that case, that would require creating the custom fields for each product (or group of products with the same sizes/colors). Building the products will take as much time, but if the size/colors don't change much over time, you'll just have to edit the 3 variants in the products for the price changes and leave the custom item fields as they are. So maintenance will be a lot less work than with 130 variants to constantly update for prices.