It really depends on the musical genre and the way you are interested in. “Medley” in MusicBrainz is a catch-all for several slightly different things: medleys, potpourris, mosaicos, megamixes, sets… which can have a specific form depending on the musical genre. So it isn’t possible to have a single solution that fits for all.
Click for a few examples I edited.
In Irish traditional music, instrumental works are most often played in “sets” (approximated with “medleys” in MusicBrainz).
Many times the arrangements are claimed by the some of the performers but no additional information is available (from the release at least). I don’t enter any medley work in such case either, instead I simply add the arranger credits to the release (or to the recordings if track-level credits are available). Here is an example of release with arrangers (second half of the tracks still to be documented): https://musicbrainz.org/release/58681bc7-56b6-49d4-bc9e-9524260a30cd
However it is indeed possible to better document the two paths that you mentioned.
If you want to improve the documentation of the “Medley” work-work relationship type and the “medley” attribute to the “Performance” recording-work relationship type, you can fill a new STYLE ticket; See Proposals - MusicBrainz.
I mostly agree but I don’t think it should be so restrictive. If a medley can be attached any additional data beyond its arrangers and the works it contains, then it is probably worth entering it as a distinct work. Of course work identifier (such as ISWC) is the most common case of additional data, but it can also be (not limited to) sheet music, cover recordings, Wikipedia article…