As an undergraduate, I have no experience with the teaching side of this question, so I might not be able to answer it properly. However, I do feel very strongly about option (1) because of my own experiences, so I'll quickly mention them as it may be of some use:

In my high school we did very few proofs. I did AP calculus, which I did enjoy, but not to the same extent as physics. Before University I had no intention of going into mathematics, mainly because of several ill-conceived views of what it actually was.

However in first year, things changed a lot. My honors course was completely proof based, and we were taught calculus rigorously. There was also a weekly problem-solving session (Putnam) where improving at proving was the emphasis. Later that term, I realized I wanted to learn more, so I picked up Rudin 3E and began to read it. The chain of events that followed over the next year made me decide to do a degree in math (particularly my summer project). I remember feeling that "I had never seen mathematics before," because proving things in Analysis and Algebra (however basic) does require a very different style of thinking.

Anyway the point that I'm trying to get at is if in my first year we had not done any proofs, I would not have applied to work in math for the summer, or had the desire to read about it on my own. I probably wouldn't be doing a degree in honors math right now (it is likely either engineering or physics).

I have personally found a trend, the higher the level the course, the more aesthetically pleasing the material is. So how can people want to go into mathematics when they haven't seen as many of the real reasons that people pursue it.

(and the really pretty reasons too)