#1, all the way.
Every setting I run, no matter how fantastic and medieval it may appear on the surface, will always, always have some sci-fi buried deep down at the core. Even if the players never become aware of it, it'll be there. IMHO, in order to be a satisfying fantasy setting, there needs to be a sci-fi explanation for the magic and supernatural elements somewhere in there.
And at least half the time, this will not be hidden from the players, but rather overt. I absolutely love the far-future, post-nuclear-apocalypse, the-Ancients-had-tech-so-advanced-that-we-use-it-as-Magic(tm)-these-days shtick. I'm running a campaign right now playing this trope six ways from sunday, and the payoff has been glorious. (It was four, maybe five sessions ago that the PCs were exploring a shielded bunker underneath volcano and found a "crystal ball", really an advanced computer, with a recording containing an ancient advertisement for a genetic engineering company to "make your dreams come true, be an elf or a dwarf or a centaur, just like in your favorite online massively-multiplayer VR game"; the player running a centaur necromancer turned to the elven viking's player and said, "OMG, we're all descended from WoW-nerds!" Then they got back in their rusty old M1 Abrams and got back to exploring the dungeon... with artillery.)