If theory 2 was correct, the AI would quickly extrapolate to the best possible version, which would be so alien to us that most of us would find it hellish. If it changed us so that we would accept that world, than we would no longer be "us".

This reminds me of the novel Three worlds collide. (wow, I've read it quite some time ago and never realized until now that it was originally posed here on LessWrong!)

Humans make first contact with an alien species which have their morals based on eating most of their fully conscious children (it makes sense in context). Of course humans find it most ethical to either genocide them or forcefully change them so that the suffering of children can be stopped... but then we encounter another species which eliminated all kind of pain, both emotional and physical, and finds us just as abhorrent as we found the "baby-eaters". And they want to change us into blobs which don't feel any emotions and exist in a blissful state of constant orgy.