I would go for Option 1 to reap the most benefit out of the established domain.

Ensure the whole page is in the local language, avoid mixing languages within the content. (Sounds logical but it would surprise you how many people don't!)

A Meta language tag is fine, as per below:
Example for Dutch (Netherlands)
<meta http-equiv="content-language" content="nl">

For a full list of both the 2 letter (ISO 639-1) and 3 letter (ISO 639-2) codes, visit http://www.loc.gov/standards/iso639-2/php/code_list.php