The former: After time N for the whole chain, global exchange rate goes to 1 BTC = 0 Sidecoin. I see nothing preventing the exchange rate function from being able to be specified this way.
So a one-way peg with limited supply
I don't see this type of scheme gaining much traction at all so I see no value in entertaining this proposition.
Well, a two-way peg that degrades into a one way peg, but yeah, I agree it probably wouldn't gain much traction in the first place. It'll be interesting to see what sidechains start getting proposed and what their exchange rate functions look like. I expect they'll be pretty straight-forward.