you cant possibly have read all of that, and still have no idea 
please give yourself some time, and simply try both ways, there is no single ‘right’ way.
Depending on your needs (only a single card, or more thoroughly customizing your full config) you could go either way. Or both, as I do…
the single binary sensor coloring would be quite simple, and, given the fact you have installed both, would allow you to do either.
There is no “right” way. But there are several workarounds.
Ok, thank you.
Then maybe one last time ask the question the other way around.
I have had numerous times in my short life time homeassistant that I started something and suddenly it was not supported anymore. And I had a lot of work, time and frustration after to set things right.
What is the “best” way to do this coloring and formatting then?
you’re best bet would be either core HA (which unfortunately doesnt do what you want (yet)) or with a piece of software that is being actively developed, like card-mod.
It would have been nice to see the power of custom-ui being absorbed by a current dev, but as it stands the is not yet the case.
Custom-ui still works, at least for these important options of icon_color and templates in customizations, but I can make no promises, as I am no dev, and fully dependent on the kindness of those that are and willing to help if and when he time arises (again) she of its functionality stops, because of the development of core HA.
Maybe I can persuade certain dev’s to rewrite custom-ui, but that would take some serious effort I am afraid