These questions are like asking an artist the following questions:
What's better - oil, watercolor or latex paints?
Is it better to paint on wood, paper or canvas?
What is the best color to use when painting?
There are no definitive answers to your questions. If you asked 10 different people they might all give you completely different answers.
As for live albums, most are recorded multitrack (16 or more channels) and mixed in post. Very few live records are made with just one or two mics, especially these days. That's not to say it CAN'T be done, but it's not something that can be easily accomplished without many years of practice and experience.
Not sure of the equipment for the Folsom Prison album, but I believe it was recorded direct to 4 track on reels? I don't think it was recorded straight to 2, but I'm not sure.