I like your first thought. That seems realistically possible.
I'm not sure your second is realistic. I don't think there's any scenario where at least one of Putin and Prigozhin don't die. If Prigozhin "settles", he will be shortly assassinated. (Watch out for windows!) Putin might be able to quietly retire, but I think the odds are against that one, too.
I would think death would be preferable to retirement for Putin. To give up his current position would simply be making him a really tempting bargaining chip for the next generation at the top, to live in unimaginable anxiety that you will be offered up to any of the thousands of enemies you've created over the past 20 years of strongman rule.
What could he possibly trade to the next ruler to maintain leverage over them and indefinitely guarantee his safety? From the West, the ICC, the Islamists, the Chechens, the Ukrainians, the Syrians? All the mafia bosses and oligarchs that he's subjugated inside of Russia? He literally has to stay in power simply to be able to sleep at night.
And it's not just him: his family, his friends, his legacy is all at risk. To give up power is to give up all his leverage to ever control the safety of anyone or anything he has ever cared about. There's no safe retirement plan for a person who has lived the life he has.
Subjugated? Russia is literally a modern day feudal state. The oligarchs are the regime's vassals. They get a slice of the country's resources which they export and share the profits with the regime/president. Or they get government contracts.
Yes, but there were a lot of vassals who were not on board with the new top-down direction in the early 2000s. Putin made a lot of enemies with vassals that didn't want to play ball with the new rules, Khodorkovsky being a notable example. There's surely plenty of others that weren't steamrolled as badly and still retain the ability to strike back at him if he's no longer the all-important boss of Russia.
That's the post-Soviet oligarchs who thought Russia had become a free market economy didn't get that they have to bow to the new czar. Of course, there wasn't a flip the switch moment from state A to B. It all became increasingly authoritarian during Putin's several mandates. He put his allies in key positions, favorised loyal interest groups, locked up or otherwise liquidated potential adversaries. It's really a mafia state, just like the late sen. Jonh McCaine said, but since they have wide popular support, I think we can safely call it feudalism.
I've read an article and they've identified somewhere after April 2008 when the Bucharest NATO Summit (Putin was also present) took place and before August 2008, when the Russian invasion of Georgia began as the moment Putin ultimately decided to invade a nearby state in order to prevent NATO expansion into post-Soviet states. That's his red line, that's why he also invaded Ukraine. He still views these countries as part of the USSR/Russian world, just like Belarus where he currently tries a Crimean-style Anschluss. The reality is quite a bit different.
I'm not sure your second is realistic. I don't think there's any scenario where at least one of Putin and Prigozhin don't die. If Prigozhin "settles", he will be shortly assassinated. (Watch out for windows!) Putin might be able to quietly retire, but I think the odds are against that one, too.