I prefer no 1 cause HUD is really important and not something you can remove for sake of visual. If you have more portraits, no 2 could be used but instead of grey/white alteration, the portrait changes depending on current health: full health = default portrait preferably with smile, 75% health = light wounds portrait with no smile, 50% = medium portrait with sad or hurt expression and 25% health = bloody portrait with badly hurt expression.