Which itinerary makes sense?

Where are you arriving from (when you "Arrive Zurich at 7 am")?

Oh.. Toronto Canada

Your "Plan Luzern" has almost no time actually spent in Luzern, which (IMO, anyway) kind of defeats the point of staying there. Your day trip on day 2 sounds exhausting. Given that, I vote for staying in the Bernese Oberland, since it sounds like that's what you actually want to see.

However, I'd advise you to reconsider your plan to hike all the way from Wengen or Mürren to the bottom of the valley. I haven't done those hikes myself, but from everything I've heard, they're extremely hard on the knees and light on the scenery compared to other hikes in the area.

Both times you are doing something in Interlaken. What? The second version has you shopping in Interlaken. What could you possibly want in Interlaken that you can't get in the mountains or in Luzern or Zürich? I ask this in all seriousness - I have to go through Interlaken or near it frequently, depending on if I am on the train, boat or in a car. Let me tell you - there is nothing there.

Two train stations. Two supermarkets, one at each station. One McDonalds. One field for hang gliders to land in. Two ship docks, one for each lake. One small model railway.

Several dozen hotels, some big, some small. Several hundred stores selling tourist junk. A couple of stores selling watches.

Honestly. You can do much better elsewhere on your journey.

BTW - I choose B.

First thanks alot for the Interlaken Intel( No, serously).. Now, my excuse: that town gets thrown a lot ( social media, brochures, ads...etc,) so i thought maybe it’s worth checking it out.
Anyhow, i’ll adapt as i get more insights.

So for Plan A, skip Interlaken with???
Plan B, well its on our way if we were to take the
Lake Brienz cruise..

Plan B - 2.

Plan A - 0

Neither.

Day 1 go right to Lauterbrunnen as planned in option 2 but don’t plan strenuous hiking. Get the lay of the land, ride the train to Muerren, walk around the town admiring the views.

Day 2 take a hike. Skip the lake cruise and forget Interlaken. Maybe hike Mannlichen to Kleine Scheidegg if you want great views, and do another hike if you have the energy.

Day 3 she what else appeals to you in the Lauterbrunnen area and work it in. Skip Zurich as it does not compare to the Berner Oberland. Hopefully your flight on Day 4 is late enough that you can travel to the airport from Lauterbrunnen that morning. Otherwise go in late afternoon of Day 3.

Laurel is absolutely right.
Skip Interlaken, avoid Zurich except to come and go. Skip boat rides when you have the world's most beautiful views only a few miles away.

Do not try hiking down from Murren or Wengen.
Instead, try hikes of Murren to Sprutz Falls to Spielbodenalp, or Grutschalp to Murren, or Wengen to Mannlichen to Kleine Scheidegg.
Visit Trummelbach Falls in the Lauterbrunnen Valley.

Laurel's plan is the one I endorse too.

As for Interlaken's "attractions," Nigel forgot to mention the sex shops and the "Paksitani" restaurant (that's what the sign said - like Punxsutawney Phil from Groundhog Day).

The Lauterbrunnen Valley is great, and should be where you spend the bulk of your time. Not near it, as in Lake Brienz or Interlaken, but in it, as in walks and hikes and lifts around Wengen, Muerren, Gimmelwald, Lauterbrunnen, Stechelberg, Allendhubel... You won't run out of things to do, from easy to strenuous, and from beautiful to more beautiful.

Luzern is very nice, and is closer to the airport if you have an early departure. Here, a boat ride on the lake or a trip up Mt. Rigi is very nice, as is walking around the town itself. Since it's only 70 minutes from Luzern right to Zurich airport by direct train, you may want to spend you last night before departure here rather than in the Lauterbrunnen valley (several hours from the airport).

With such short time in Switzerland, don't spend it on the B-list (or lower) places; focus on the best.

Day 3: Check out at 11am, stop by at Luzern on our way to Zurich..
How's that sound?

Other than that, everything seems to be in place (from Laurel's perspective)..
Btw, How's the ride from Zurich-Bern-Lauterbrunnen? Is it scenic?

I agree with Laurel and shoe. Head straight for the valley. Do not walk from Murrendown to Lauterbrunnen Valley with your limited time. The more beautiful ride is from Luzern to Interlaken. Spend the night in Luzern if you have an early morning flight. The airport is about a hour and fifteen minutes away.

Have fun.

In answer to the OP's question, the Zurich to Bern to Interlaken Ost train ride is nice.

However, whenever possible, route yourself via Lucerne/Luzern (Zurich to Luzern to Interlaken Ost, or reverse) as that route is MUCH more scenic.