Hi Ryan

It seems you're considering some real audio classics for vinyl.  The SCA-35 appears to have a phono section, so option 2 would work.  But the NAD does not have a volume control as far as I can tell from their website.  So you would still need an actual pre-amp, such as the PAT 5, with option 1.

The challenge will be finding all this Dynaco equipment.  Audiogon has a few ST-70's for sale between $500-$1000.  And when it comes time to replace the tubes, you'd spend another $200-300 (roughly).  This might quickly take you out of your planned budget.

It might be better to get a basic NAD integrated with the PP 3i phono stage.  Sterephile reviewed the NAD C 316BEE here, http://www.stereophile.com/content/entry-level-7-page-3

So the integrated would be $349 and the PP 3i phono stage is $199 (approximately...I'm getting the prices from Stereophile reviews, which might be out of date).

So far, that's $550, leaving room in the budget for $1k-$1,500 speakers, or to get a larger integrated or even a few more records.  

If you're not sure about NAD, Rega makes great products and has an integrated amp with built-in MM phono stage (http://www.audioadvisor.com/prodinfo.asp?number=REBRIOR)

Other brands to consider include Creek, Arcam, Marantz, Rotel, Cambridge.  They would all be better than the Kenwood; easier to find than the Dynaco; and cheaper to maintain.

One last thing of course is if you're going to buy used, you can just park on a site like Audiogon and wait for some good tube stuff to come up in your price range.  Right now a Rogue Audio tube integrated it listed for $1,500.  You'd still need that NAD phono stage, but you'd get in for under $2k.

Or there's a VTL amp/pre-amp combination on sale for http://app.audiogon.com/listings/tube-vtl-stereo-50-50-amp-with-matching-integrator-preamp-2013-05-14-amplifiers-49504

Just some ideas.