My reasoning is essentially the same. There's only one 9m left, and even if you get the straight, you lose tanyao, which is only a 1 han difference closed and (if open tanyao is allowed) worth the same open. Just go for the tanyao with two dora and whatever else you can get on the side. I'd open my hand for this if an opportunity presented itself (if open tanyao was allowed).
As to which character to discard, I don't really differentiate between the 1m and 8m in this situation. Neither of them seem obviously safer than the other, but my instinct is to discard the tile I just drew.
A Slightly Different WWYD:
However, I do question the third go-around discard of the 8m. Since we know we discarded all of our draws afterwards, let's take a look back at what our hand was at that point (not knowing what tile was drawn, I'll just show a sorted hand of 14 tiles):
WWYD?
I would've cut the 2m instead. Why? Looking at the pond, I already see that two 9m and one 1m have been discarded, and my hand is in shape for tanyao anyway, so a straight in characters doesn't look all that appealing to me. However, keeping the pair of 8m allows me to easily turn the pair of 8d into a triplet of dora if I happen to draw another one. And if I don't, I can always discard the second 8m later, and still have [345][678]m.