The best practise is to have one WSUS ( upstream ) connect to the internet to download updates as per your options choice.
At the downstram , you will configuire the WSUS to download the update from the WSUS upstream one. this can be done from the option setup.
Be sure to open the required port from the firewall.
You will need to have an OU for servers , workstations that will be getting the update from the WSUS downstream.
Once you identified the OU, Link it in GPO to the WSUS computer group.
You will find these computer groups will apear at the Upstream WSUS server
Now , to approve , decline the update. this will be done from the upstream level.
Hope this will help.