7thripr I was thinking about this earlier. As it stands, having both "www.google.com" in the address bar and "Google" in the current tab is a bit redundant, so I like this idea in principle. However, implementing it in a way that feels natural would be tricky... For most layouts I've been able to think of, it's overall worse — i.e. the weirdness is increased more than the redundancy is decreased.
The only thing I can think of that might work: Remove the address bar from the toolbar entirely, and only have it appear (replacing the current page's favicon and title) when you click on the currently-selected tab (or hit ⌘L). This would potentially work quite well with Option 2, actually, since they already use the same border style as the address bar…
Kagi team, if you'd like a mockup of this, let me know, and I'll see what I can do! 🙂