Situation 2 is where we're going to end up, and it sucks (imo) because we're still tethered to a language that was never designed for applications.
The web wasn't designed for applications. Many times people are trying to shoehorn what belongs on the desktop into a web browser. Adobe bought Macromedia because of Flash and only because of Flash. They saw how ubiquitous it was getting. MS likely developed Silverlight for pretty much nothing else than to compete in the same space.
If you need something that so advanced that it can't be done in Javascript or on the server side, then re-consider using the default web browser. Develop something to download and launch.
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