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Do you prefer option A, option B, or having both A+B options for creating annotations in Svelte?

Option 2, definitely.

It does, however, prevent you from putting it on something other than a span... Will have to think.

In theory we could provide a prop to set the element type

What about a solution like bit ui's child snippet?

In this case we can just use a simple prop

Yes but then you would need to add all other things like bindings, types that understand the as=..., as you may want to add other attributes to that element, etc.