i'd go for option 2
i went to japan last summer for two weeks. longer would have been better, but you can do alot in 2 weeks.
have you heard of the Japan Rail Pass. if not check it out i recomend it
http://www.japanrailpass.net/eng/en001.html
thier bullet trains are awesome you can cover the whole country easy in two weeks using them. they are expensive, the rail pass will pay for its self pretty quick