It's all up to you and the individual chinchillas. I use runs and colonies. A lot of my males do not like to breed in colony cages...why I have no idea, but they won't breed in colony cages. The majority of my males are in runs and do very well. A lot of people do not like the idea of the collars on the females. If you do runs...check the collars on the females often as the female can gain weight and outgrow the collar, essentially making an embedded collar that is painful. I've had to move two of my girls out of runs because they outgrew the two pronged collars and my three pronged collars are not put together yet.
You can breed in pairs, colonies or runs. It's all personal preference. So there isn't really a "best" set up. Space wise, colonies let you breed on a larger scale without using as much space.