Active Directory distribution groups vs security groups best practices
Solution 1:
The difference between SG and DG is only that DGs can't be used to control access rights / permissions. If you already have SG with all needed members then creating another group would increase administrative overhead. Just mail-enable existing SG.
As for nesting, it mostly works in on-premises products, like AD/Exchange/SharePoint but might not work for some scenarios for Microsoft 365 cloud services. It really depends on what exactly you are trying to achieve