I'd go with 3 reefs, if you can change it. 2 can be too much for good control. You may never use the 3rd reef.
35-40 knots. Quite a squal line too, with higher gusts. I doubt anyone here would sail your boat into that with any great success. Please don't be offended, Bill, but saying otherwise in that boat is probably just talk. I do, however, agree in priciple. I just dislike the idea of presenting what might well be an unrealistic plan. THe OP was concerned about engine failure, so motor sailing is not exactly a solution, though as you say, it can help.
Having sailed for 30 years and having expereinced many surprises, your mistake was trusting a weather forecast the way you did. The weather was EXCACTLY as predicted, just a bit early. It could easily been sustained at 60 knots (it was where I was) and no combination of sails or engine would have worked well for you, close to a lee shore. Be conservative with changable weather.
I don't think a JSD makes sence in the Sound. The advantage of the JSD is in huge waves. A large parachute is better for parking, but a ground anchor is better yet.
I considered 3 reefs, but realized that with my rig, the 3rd reef was going to be so far up the sail as to be pretty much useless.
The peak of that storm was only a few minutes, but the gusts did tear my storm jib in a few places, and would have shredded it if I hadn't taken it down. Still need to get that repaired... Most of the storm was blowing about 30, gusting 35kts. My anemometer did record a gust of 47kts (just about the same time the storm jib started to rip apart too). It spawned a tornado or two on Long Island that day.
As to trusting the forecast too much, you are correct, it was exactly as forecasted, just very early. I heard the weather update that a storm was heading out way and immediately checked 2 online forecasts and while listening to wx 1 on the VHF, they all said the same thing, that we had plenty of time to make it back to the dock safely (so I headed back immediately). The storm just blew in way faster than anyone expected. When we started home (about 8nm to go, with a favorable wind) the storm had not even reached Philadelphia yet, and was forecasted to reach Newark in 2 hours, and reach us in just under 3 hours... In less than one hour it was on top of us.
My goal is just to have a backup plan should I again get caught by a very fast moving storm before I am able to duck into a secure harbor. I can motor against whatever weather will suddenly come up on the sound and if not make much headway, at least keep off the lee shore, for as long as the motor runs... Since the sound has some pretty deep areas, I figure something to try slow wind drift would be good to have as part of my arsenal.
rgranger brought up a useful idea of keeping the boat in place while swimming. I normally throw out a 50' line tied to a small fender in case the boat starts to drift quickly away from the swimmers, the line would be trailing behind the boat and you can use it to pull yourself back in. For $50-60, I think I'm going to buy this to secure the boat while swimming (and get a heavier "swim" line to go with it). Once I see how effective it is while swimming, I'll have an idea if it would actually be effective against heavier weather or not.