I would say #2 for a few reasons. For one, I would avoid short sales like the plague. It's so time-consuming and for some people doesn't even work out after all the waiting. For two, you have to put a decent chunk of money into that house.
That aside, we have two separate closets in our master and I would highly recommend. Saves us many a fight. Plus storage is a godsend. I would take a smaller house with lots of storage any day, because otherwise you're talking about making that extra guest room or whatever a junk room, rather than having storage be where it should.