I like both, honestly. Hawkworld is by far my favorite Hawk story though. I don't care what it did to DC's wider continuity; as a stand alone Hawk story it's excellent.
The reincarnation concept is relatively uncommon in comics. You can explore all of DC's history with the Hawks, and Egyptian history and myth is fascinating and really enriches the mythos when used right. Especially if you start working in other characters like Black Adam, Metamorpho, Ra's, Etrigan, Nabu, etc.
But Thanagar is probably one of the most interesting space civilizations in comics. I love the idea of the seven devils and how they influenced society, the fall of the Thanagarian empire.....I love the Stargate vibe to it all, and the fact that for most of its history Thanagar was at least moderately evil. A hero coming from such a place is an interesting story with some serious Elric overtones. The "space cop stuck on earth" angle isn't overly unique or interesting, but Thanagar itself is just so crazy cool I feel you'd be doing a huge disservice to the Hawks if you cut it out.
So I suppose my preference is for the combined origin because both options are too good to pass up, but I honestly am not sure if it's been done to its potential yet. I think Johns did a great job with the mess the Hawks had become post-Hawkworld/Zero Hour, but it still felt disjointed and clunky to me. I think there's a way to fold both versions into one origin that can still be boiled down into an easy-to-swallow bite.