How often do you find that your AWS IP is blocked, or that you need to bypass a captcha? I would think that AWS would be a major source of scrapers and other traffic that a site might not want and might choose to block. I know that Cloudflare offers to block "suspicious" traffic, which would seem likely to include traffic coming from an AWS server rather than an ISP.

Surprisingly not often at all for the sites of interest to me. YMMV of course.

That sounds like a lot of trouble to go to every time you want an anonymized browsing session.

Inconvenient and cumbersome at best.

Which, the first or the second option? The first one entails a one-time 10 minute setup and you can leave the AWS instance running if you don't mind incurring a small ongoing EC2 fee.

Does this protect you from a warrant to Amazon revealing your identity?

No but this is not a problem for me since my use-case is more avoiding MITM attacks and safely using public Wifis.

Every VPN has an endpoint, and whether that endpoint is acceptable depends on your use case.