Personally I really doubt (2). I work in theoretical condensed matter physics, and it's awfully hard to accurately simulate anything with more than a very small number of atoms. Sure, computers will continue to get faster for a while, but these problems scale very badly with the size of the system, and we're not all many orders of magnitude away from the fundamental limits of computation. I suspect that even if you were to convert the whole mass of the solar system into one big computer, you probably still couldn't run a decent simulation of any system on the scale of 10^23 atoms.
It's possible you might be able to run a somewhat dodgy simulation which doesn't work on the atomic scale unless it has to (e.g. when your simulated person decides to do some atomic-scale experiments, it would suddenly launch a proper simulation, and otherwise it could get away with a neuron-level simulation). But I still don't think that we'll ever get the computing power needed to make these kinds of simulations trivially easy.