I think a lot of it has to do with the ability/capability of yourself and your opponent.
If I have to hit a passing shot, then I would prefer a running forehand. Unless I can blast a squash shot Kiefer style or my opponent can't volley underspin, then any slice type of shot will be an easy put away. I
If your opponent is not coming into the net, then the options tend to vary. If I can recover quickly and can hit an offensive shot, then I will go for the forehand. If I know I'll be lagging in my recovery, then I will opt for the squash shot. However, the most important thing for me is to make sure the squash shot neutralizes the rally. If I can't then the squash is pointless, it just gives my opponent a huge advantage. I'd be better off just blasting the forehand and hope for a winner.
If I'm on the dead run, then the squash shot is preferred. I need the extra time to recover. This is barring me deciding "screw it, I'm going to hit a winner" and hoping for the best.
If you can neutralize the rally, and know your opponent won't/can't do anything, then hit the squash shot. Reset the rally and buy yourself time to recover.
If you're confident in your offensive capability, then hit the running forehand. You'll either regain advantage or win the point. This is my (and should be the) preferred/optimal choice.