Players in case (1) have an incentive to minimize the risks to their characters, as part of the process of beating the challenge. This means that case (1) play is unlikely to produce a
story in the literary/aesthetic sense, for two reasons:
(a) The characters risk being somewhat incoherent, being risk-minimisers locally (always poking with their 10' poles, etc) but ludicrous risk takers in their overarching goals (always taking on these puzzles/gauntlets/challenges with insane kill rates). We can lampshade this by imagining that all our 1st level wizards also have the personalities of extreme sports enthusiasts, but I think the characters remain a bit weird.
There's a nearly century old aphorism on a particular population that on a large scale are seriously risk taking, but are, in many cases, extremely cautious, because they know the risks they are taking.
There are Old Pilots, and there are Bold Pilots, but there are no Old Bold Pilots.
Note that this is cited often by CFI's and CFII's in Alaska, where most of their Commercial Pilot Students are going into the bush plane market...
As a clade, Alaskan Bush Pilots are maintenance sticklers. They memorize their checklists but still mark the physical one. Many will double check their fuel tanks and oil sumps for water not only upon first startup for taxiing to the pumps, but upon arrival at the pumps, and after loading fuel. They're double check the pitot tubes at the pump, despite having checked them before startup. They know their job is one of the more risky - Jumbos may be safer than busses, but flying into a village and landing on a grass field that may not have been mowed this year, or putting down on a river on floats, or short-field landings on riverine sandbars are inherently risky. And the pilots do their damnedest to minimize the actual risks at takeoff and landing. (Flying a plane is easy. Taking off is almost easy. taking off from a river with a crosswind is tricky. Landing is dead simple if you don't care about surviving it... landing so you and the plane remain functional isn't.)
Likewise, a similar aphorism has been used by several police officers. Yes, the job is a HUGE risk of injury. Body armor, training, and procedures are there to minimize those risks to the officers. And, when practical, to also reduce the risks to the individual the officer is interacting with.
What I've seen of cavers is similar.
The Divers I know have made comments of "bold divers get bent, cautious make rent." (The two in question were an underwater weld inspector and a USN SEAL)
Fundamentally, that same can be said of Firefighters, EMTs, Linesmen, soldiers and sailors in general, and astronauts.
So the micro-scale cautious with macro-skill riskiness is actually not uncommon in the real world.