XenForo does not connect to MySQL directly and only goes through PHP, so PHP would need to support the new auth method (as the message states: having libmysqlclient 8.0), so for XenForo, or any PHP software, it would not matter what you choose.
Under Linux, either option would work. So I assume it's the same with Windows Server.
If you don't know you "need" MySQL5 compatibility, you should choose the strong encryption.