We had the max buffer on all totems at launch and it was an Epic Fail.
I'd prefer option 1. Coupled with a resource based upkeep and expansion purchasing it would introduce an entirely new kind of PvP that doesn't involve actual fighting.
In the absence of the resource based system, we NEED to have the system that accounts for inactive (non-subbed) players. That way if a blocking tribe can't keep up their active count and drops in radius, the other blocked tribe should auto-grow into the blocking tribe's previous space if they have enough players to do so.
With option 2 none of this is a worry at all. No changes at all except that you get the convenience of auto-growing, like DDT said above. If that was all that was intended, then fine #2 is best. But it seems like there was some sort of desire to add in extra conflict or logistics to the system. Option 2 doesn't really provide much of that at all.
If I'm not mistaken, there is already a buffer in place for totems other than homesteads, isn't there? The more buffers and reserved space you put in, the more you are going to return to the issues we had at launch where new people(heck not even new, just the initial crop of players) coming in simply couldn't find space to live due to it all being taken up by "may build here in the future, maybe..if I don't quit next week" space. Most of the time you couldn't even see the totems that were keeping you from placing.