Aren't they already confused at the moment? Arc 1 is on the other author's account. I think if you simply add lots of disclaimers, and put links here and there it won't be worse than it already is. Also, Assu can change the synopsis of original arc1, and say that the re-edited version is on your account.
I would agree with Sailus on doing both while making sure to emphasize that these are updates to older versions. I would also say that you could make a whole new story for arc 1 and label it as an updated version to attract new readers.