Tough call on this size machine. I have had several 5C chucks and made my own ER-40 chuck for D1-4 back plates. I would only advise a set-true/adjustable type, my experience with the non-adjustable ones (both 5C and ER-40) is the TIR was terrible on most chucks . There are some work arounds, but the cost of difference of getting a set-true is now not so great. There has been some prior extensive postings on the pros/cons of the different collets, but I will address your comments above.
Please be aware the ER collets are designed to hold round cutter shafts along the full length of the collet, not shorter length stock. This is because the collet collapses from both sides in the chuck. It provides superior holding power to 5C collets which only collapse at the tip of the collet. The advantage of 5C is you can hold very short stock at the tip of the collet, like 1/4" with a short stick out length. You cannot do this with an ER collet unless you put a short piece of stock (the same diameter) at the back end of the collet. Although 5C has less holding power it is sufficient in most cases. The only time I have had an issue has been with threading round stock and have it slightly twist in the 5C collet.
ER collets are inherently more accurate when it comes to TIR in the chuck, but there are many factors. The 5C collet does have a very limited clamping range, even with that if you are a little over or under relative to the collet size the TIR will be significant and you can get skewwing of the piece. Even with a full set of 1/64th increment 5C collets you will have gaps. ER has a wider clamping range, many people get a mm increment set with the premises that the clamping range is 1 mm (0.04"), but my experience and what others have posted with both ER-32 and ER-40 collets is that a 1 mm increment does not do so well at the clamping extremes. I ended up with a 1/32" (0.03") increment ER-40 set which will be much closer to the imperial rod sizes I would be using. Some of the ER collets may be for a given diameter tooling with a narrower clamping range. If I am holding a metric shaft, I typically use a metric ER collet unless there is a close imperial equivalant.
A 5C collet closure is not an option with a small spindle bore. It might be possible to use a 5C collet stop that thread into the back of the collet if the back plate hole is enlarged, you can also use a through the spindle stop system, I use both. A through the spindle stop would be used for the ER system. A 5C chuck would require a key to thread the collets, so it can be a slow process to get the collet in/out, I use a speed handle and it takes about 40 seconds to change out a 5C collet. An ER system can be a bit cumbersome due to the wrenches/rod to secure the chuck and remove the nut. The ER collet needs to be snapped into the nut before putting it in the chuck. So time wise between the two, they are both slow. A 5C chuck will be quite a bit heavier and have more stick out (length) vs. and ER chuck. This may be more of a factor on a smaller lathe.
Cost wise, ER-40 will be less expensive for the chuck and collets. My preference between the two is to 5C, but I have a full 1/64th collet set (and I have used almost all of them). I also turn a lot of short stock pieces, with a lot of repeat machining where I may need to chuck up the piece 6-8 times between turning, drilling and tapping (and also doing a dozen of these parts at a time). Try that with an ER system and I think you would go nuts quickly. I use the ER-40 for longer stock, holding odd size stock that doesn't fit a 5C collet and sometimes for holding threaded rod securely.
https://www.hobby-machinist.com/threads/er40-vs-5c-collets-accuracy-in-a-lathe.57438/
https://www.hobby-machinist.com/thr...ne-adjustment-collet-chuck.66421/#post-572356
https://www.hobby-machinist.com/thr...f-a-d1-4-er40-set-tru-adjustable-chuck.62816/