Taiwan should develop into a federation that is dependent on both US and Japan, and independent of China.
Given that China has decided to become the Russia of the Orient, it is not in Taiwan's self interest to be independent from US and Japan. An independent Taiwan becomes viable only if China were to become in the same civilization camp as US and Japan. If China is not, then an independent state will likely be annexed by China in a short period of time, assuming non-interference from US and Japan. This is because independent states still have the potential of being merged or annexed. See for example, Korea, and Singapore's constitution. Again, if China were to become in the same civilization camp as US and Japan, then an independent Formosa would be beneficial to all Japan, US, Taiwan, and China in the long run. (Think 300+years instead of 30 years.)
Alternatively the worst case scenario is the Korea peninsula example, or the Ireland example: meaning that an indepdendent Taiwan state is backed by US and Japan but some territory is carved out, for example Jinmen and Mazu. Half a Korea is still a Korea state. ¾ of an Ireland is still a Ireland State.
Taiwan's independence will be accepted by the Chinese if Taiwan becomes English or Taigi with its own writing system. Mandarin puts Taiwan at great risk. I won'g go further because this is the irony only someone who really understands Chinese-ness can comprehend.
A Federal Government of Taiwan assuming the role of Taiwan Authority as per TRA will be popularly accepted by Formosan. There are many examples in the world where the figurehead is a Monarch or a Governor General. For example Malaysia and Canada. This is full autonomy currently supported by US.