Note that option 2 can be performed entirely on-chain, simply by using the internal exchange between STEEM and SD.
Option 1 involves a certain degree of risk; you can't know exactly what price you'll get your exchange at, all you know is that it should be relatively up-to-date at the time the conversion takes place. Option 2 has no risk, but subjects you to the vagaries of asset markets. You can pick your own price, but will anyone be willing to trade at that price? You can choose a price you know someone is willing to trade at, but will you have to take a significant cut to make your trade quickly?
As market volume increases, though, the difference between the two options will probably begin to disappear (and no one will likely bother with option 1 at all).
That makes sense. Something I've been wondering for a while and didn't know exactly how it worked. Maybe you could do a post for newbies that shows exactly how a post is paid out. Like if it says $100 for the original blog and a few different comments have dollar values too. That might be helpful to some people. Especially since you have made a bite sized video that anyone can quickly watch and understand.
That is a good topic; unfortunately, I don't understand it that well. Perhaps it would be good for me to dig into the code and see exactly how it works, then elucidate it for others. :)