IMac – Running macOS Sierra (10.12) or macOS High Sierra (10.13) on a 21.5″ mid 2017 iMac

Your iMac was delivered with 10.6.6 (somewhat later with 10.6.7). When you have the original (grey) discs that came with it you can use disc 1 to install the Snow Leopard version (not the disc of another machine). Then update it to 10.6.8

You've enumerated the options quite well there, most of which are described in greater detail by this Apple support document.

rsync-ing the three home folders across might not preserve all meta-data (which may or may not matter to you), and there are aspects of a user account that exist outside /Users/<username> so rsync alone wouldn't result in working user accounts. Don't be tempted to rsync anything outside /Users!

Plugging the Time Machine drive into the new machine and using Migration Assistant is likely to be the simplest and fastest option. If you want to take the opportunity to leave some cruft behind, it might not be best suited - I don't recall what level of granularity is offered.