Well, for better or for worse, I started the lace v-neck sweater. I diligently measured some store bought sweaters that fit me well that are also cotton and 40 inches definitely seemed like the way to go. Thank you to everyone for their advice on this!
As for the waist shaping, I followed the instructions for making darts that I found here.
So far, so good. I decided to decrease 3 inches for the waist as that is what my store bought sweaters seemed to do. It seemed best to stay a little conservative for my first attempt at shaping. I hope it works out!
For 3 inches, I had to have 4 rows of decreasing, which I spaced 8 rows apart. I think the decreases look nice, as you can see in the picture below. The yarn I'm using, Reynolds Saucy Sport, is good to work with so far. It does knit up a bit uneven looking in certain places, especially around the decreases, but all that evened out when I washed and blocked the gauge swatch I made beforehand. The yarn nicely didn't not shrink or stretch any for me after the wash. I think I'm safe.