Wa alaikum assalam brother.
I interpret this as more akin to your first option but with a slight difference.
As you will note, the previous verses to 9:33 (9:31-32) frame the context in which the Quran is narrating the verse
i.e. to the primary audience of the prophet's ministry. Any other interpretation is secondary. This can also be seen with verse 48:28 that has been quoted in context of its previous verse (48:27). It is the immediate false religions that are being referred to.
Therefore, the correct ‘deen’ was revealed to prevail over
all false 'deen' (systems / religions)
at the time of the prophet
PRIMARILY . It is only
by inference that other prevailing false religions can be included as and when the message of the Quran spread to them
(22:78 - …that the Messenger may be a bearer of witness to you, and you may be bearers of witness to mankind…”) Also many make use of these verses to proclaim that Islam also came to prevail over Christianity and Judaism. As was shared in the following article
[1] regarding verse 9:33
009.033
“It is He Who has sent His messenger with guidance and the religion of truth, to proclaim it over all religion (Arabic: - dini) / systems, even though the Pagans / Idolaters (Arabic: Mushrikeen) may detest it” Many Muslims
incorrectly make use of the above verse to imply that Islam has come to be proclaimed and conquered over Christianity and Judaism, even though the verse clearly refers to ‘idolaters’. Not only is the context misunderstood completely but a true understanding of the term ‘Deen’ from a Quran’s perspective is never appreciated.
This verse clearly informs the reader that proclamation
is over any ‘system’ which is false. This should be obvious given the clear mention of ‘idolaters’ by way of an example. Today there are practices
even amongst Muslims that clearly fall foul of the system of true Islam instituted by scripture in that they seek assistance and help through other entities besides God - rather than through God directly.
I hope that helps, Insha’Allah.
Joseph
REFERENCE:[1] WHAT IS THE TRUE DEFINITION OF 'DEEN' FROM A QURAN'S PERSPECTIVE?http://quransmessage.com/articles/what%20is%20the%20true%20defintion%20of%20deen%20FM3.htm