Sure he was a powerful duelist, but a group of others could take him down.

I didn't read that even slightly as if he was talking about magical power; I read it as he was talking about Dumbledore being extremely influential.

That's like saying "Dumbledore had the biggest assault rifle of anyone, so he can do anything".

Except it's not, not even close. Having a gun is not the same as having authority and influence in an institution or government. He ran Hogwarts, for one thing, as you said. He could have very easily refused to have house elves at the school unless they were paid employees, and that alone would have made a very public statement, which would have meant a lot on a societal level coming from such an important, influential, public figure. There are other options for labour, so it's not like he had any excuse not to. He also had political influence and could have pushed for changes in legislation if he wanted. Part of why the ministry was so afraid of him was because of the influence he had. It wasn't because he was a string wizard and they thought he would come to the ministry one day and shoot up the place if he didn't get his way, Dumbledore could only do so much against an entire building full of powerful wizards, even he wouldn't be able to stand up to all of the ministry's aurors. He had friends, connections, a reputation, a history, control over one of the most influential schools in the world which produced a significant percentage of the world's licenced and trained Wizarding population, direct access to thousands of witches and wizards who could all potentially be the next minister of magic or the next Voldemort or hell the next Dumbledore. He absolutely could have leveraged that to change something societally but he only ever used it to maintain his own status quo when the ministry got too jumpy and tried to knock him down a few pegs.

If he goes with 1, he has to maintain favor.

You say that like it would be difficult. He was beloved by most of his students, many of which had influential parents or would become influential themselves. He had an untold number of connections from favours he'd provided over the years, people he'd helped, or even just friends in high places. He was close with many high ranking experts in their respective field including his professors and others outside of Hogwarts. He'd previously been the one to take down the first wizard Hitler, and had been instrumental in fighting the second wizard Hitler. Etc, etc. His favour only slipped with the ministry precisely because they were aware of the power he held politically and were afraid of him leveraging that, and thought his claims of Voldemort returning were part of a move to take over the ministry. That was the entire deal behind the Dumbledore's army conspiracy. Even when they managed to force him out of Hogwarts they had to basically play dirty and strong arm him out of the position because they knew they couldn't do it through any legitimate channels. Even then the school constantly pushed back against them taking over and it became a nightmare to deal with.

But it's not like he would have to stage a revolution to enact meaningful change. All he'd have to do is suggest a change in legislation to important figures who respected his opinion, openly advocate for said legislation to gain public support, y'know, regular everyday activism and political lobbying, and he'd undoubtedly get results.

Yes, the two modes. Timid acceptance of the status quo with minor calls for change behind closed or full blown revolution and authoritarianism.