Unless you're talking about stereo only listening, using option 2 is the only way to go. If you don't you don't get the dedicated LFE channel, or anything from any other channels that is being directed to the sub by the crossover in the receiver. (Same deal with using the sub's crossover instead of the receiver).
Also, on my sub (in my opinion), I found the line level inputs performed better.
Frankly, I'd rather run a single cable to the sub than (min) 4 separate wires to the sub, and then 2 wires to the fronts.
