I am a fan of the 529 plan. I don't feel it is too restrictive. We get a state benefit. We use the vanguard NY plan.
If all goes as expected, we will cash out w/o penalty when my kids get scholarship! (I'm half joking, I don't want to put a ton of pressure on my kids...) If it goes a little less than planned, we'll use the funds to pay for college. If we go further down the spectrum of not needing it, we'll hold them for other family members that may find them of use, or future family members (grandkids, my nephews, whatevs).
I am trying not to overfund them, but I don't know exactly when to stop. (Kids are 5 & 7, 529 balances are 30K and 27K)
I remember reading something about having grandparents open the account instead of the parents, to keep it from getting counted in FAFSA stuffs, but I thought, "hey, if we have the money, we have it, no need to hide it..."