Sherrel: I would go with plan 2. It might actually work. What is the minimum curve radius? Minimum switch is probably a #4. Looks like a challenge worth taking.
One word of Caution, I chose a 5x10 plan out of one of the Kalmbach track plan books, figuring it would be perfect. It had main line continuous running, reverse loop, multiple elevations, industrial sidings, small yard, and a branch which could connect to an extension. I laid out the track, on the 5x10 board, using the recommended 22" and 24" radius curves, #4 switches, etc, and the curves on one side overhung the board by 18" (Using sectional track). Whoever drew up the track plan, miscalculated. I built out to 5x12 but still had all sorts of problems, so take your time plotting out the actual track.