I did mine halfway like your #2. I intended doing it like #1 but could see the liner...I couldnt make enough overhang with the rocks I had. So, I put one row of rocks around. Unfortunately, it makes kind of a jagged edge on the lower side so am worried if the fish ever decide to spawn.
Going all the way down to the footer was not really an option since it is 32" down. I wish I had used a 4" top block around the perimeter to make a tiny ledge one block deep. That would have removed my irregular edge underneath the rocks.