I've been told to do neither, rather, lean your body into the turn but keep the bike more upright. The theory being that the tires have more traction when they're as vertical as possible. Not that I can ever really do that, so I just stick with #1.

There's an exception -- don't lean your body too far inside the curve if there is an obstacle there, such as a telephone pole. I nailed a support pole once pretty hard, *running* on a suspended indoor track. I didn't realize that you also lean inward when you're turning on foot. Surprised the hell out of me.