I'm assuming you mean "web" and not "wed" development.

(Just so you know that I'm coming from a tech background -- I currently work in imaging research, but still do a crap load of writing software/IT stuff. I also still freelance/dabble on occasion in my 'previous' career of web development, with PHP, Perl, MySQL, Linux, HTML/CSS, etc).
Options 2 -- I hear you from the $$$ standpoint. I got my B.Sc. in Computer Engineering, and then went back years later for a M.A.Sc doing what I do now. It's not cheap, but don't underestimate the power of letters behind your name. You might be the best, most rational coder ever, but many companies won't even look at your resume without the degree. Unfair, perhaps. But a classical education should not be underestimated.
Option 1 is more practical for you now -- C programming is a little dated nowadays, unless you plan on working on coding real-time firmware or something, although it makes you appreciate the advantages of modern languages/libraries. Java/PHP would be handy, but only if they accompany the instruction with analysis, class design, software architecture, design patterns, etc. If they're just giving you the syntax and homework assignments, you're might be better off buying a book, reading, and coding stuff yourself. If you go the book route, I suggest anything from the "O'Reilly" series of 'animal' books (
http://oreilly.com/animals.html). They're quality.
If you do option 1, add in a little system administration knowledge for yourself. If you're only familiar with a Windows background, learn Linux. Cobble together an old PC, Google for a good distro (I use Gentoo - can be a pain to work with, but you'll learn a shit-load, and has more 'street-cred' with developers than Ubuntu) and install. Setup a web server w/ Apache, code stuff for your site -- at least you'll then have a portfolio to show clients.
Option 2 is safer, but pricier in the short term. Option 1 can work, but you'll have to do some work on your own, and you might be free-lancing for a while anyways until you have a few gigs under your belt and have experience. I would lean toward option 2, but that's the route which worked for me.
Good luck.