What type of 'green chili' is best here? Serrano, Thai, etc.?

It probably depends on your level of heat tolerance. Here is a link to a Food52 article about chiles, which has some information on relative heat in different types: https://food52.com/blog/12216-all-about-chiles. Also, even using the "1 green chile" called for in the recipe, you can vary the amount of heat by using or not using the seeds and membranes of the peppers (which is where the capsaicin -- the heat-producing compound in chile peppers -- is concentrated).