VAT threshold is £85k and sales of zero-rated items count as ‘taxable sales’ as far as the registration threshold is concerned, along with sales that are subject to 5% or 20% VAT. You do not need to include anything that is VAT exempt in your assessment of the threshold.
You are unlikely to be caught by the flat rate-limited cost trader rules where the default rate is 16.5%. So in my view, a flat rate is generally better in your case.
However, you need to work out the various scenarios and see whether the increasing sales vs increase in your prices for the 20% VAT items is worth it in terms of profit and cashflows. You will also be able to claim VAT on the purchases if you are on normal VAT scheme.
hope this helps