There is a 2 version of the song Original studio version and re-recorded with some different instruments one, it isn’t demo/acoustic/edit/instrumental/mash-up
How to establish relationship between them?
My current understanding is that both should be under the same Work. Relationship Recording-Recording but I don’t know which one, my best guess is to use remix. Or should it be separate work?
There is another artist that has “Orchestral” versions of songs, I guess it’s the same case.
A re-recording is just that. A re-recording. Just another recording of the same thing. There is no real relationships to say this. Maybe if you have recording dates, or a different line up of people. Yes, they link to the same Work.
It is not a remix. A remix is where you take the original recording and change it in some way.
Exactly, where thing equals MB Work. 
It is the same in sense that song has the same lyrics, vocalist and general structure. But it’s another version with different lineup of musicians playing other instruments.
But it is not “Just another recording of the same thing”
Yes, that’d be just another recording of the same work, same as a live recording would be another recording of the work for example.
and they are linked by relationship via the same work, not between recordings, correct?
Yes, that’s how it generally works. We’d only link recordings directly if one explicitly remixed, sampled, etc the other, but if they are different recordings of the same song, they are only linked by the work.
thanks for the answer
The different lineups can be noted as the different performers of that Recording.
As @jesus2099 corrected me, I meant link both to the same Work as these are two different performances of the same Work.