I just got back from Peru and the only place that I really felt the altitude was in Colca Canyon (that 16,000 ft pass). My BF on the other hand felt the altitude in Cusco and in Colca Canyon. Arequipa is located at 7,700 ft (2,340 m) — about 3,000 ft (1,000 m) less than Cusco or Puno. Few travelers ever experience altitude sickness while visiting the city, but it does give you some time to acclimate if coming from sea level. I'd recommend doing the second itinerary. On-route to the Canyon there are some pretty high passes which might affect you, but you are only passing by, so shouldn't really affect you that much. If you were to do Cusco first and the Inca Trail then again 2 days at altitude if not 3 is recommended. I can't imagine how he would have handled it if we didn't spend a week in the Sacred Valley, MP, and Cusco before going to Colca Canyon. In terms of altitude sickness, the starting height for most cases of altitude sickness is 8,000 … If you go to Arequipa and the Colca after then you should be already acclimatized.