We use 'ng' when you want to say of, like Perlas ng Silangan, which
translates to Pearl of the Orient/East. We use 'nang' when you want to
say so that, like magpayong ka nang hindi ka mainitan, which
translates to, use an umbrella so that you'll not feel hot.
I think 2 is correct.
Uses of NANG:
1. as a conjunction (when)
Natutulog ako NANG siya ay dumating.
-I was sleeping when he/she arrived.
2. to make adverbs from adjectives.
(to answer the question How/How much/ How many/How long)
Tumakbo siya NANG mabilis.
-He/She runs fast.
Naglakad siya NANG isang kilometro.
-He/She walked a kilometer.
3. When two actions repeat.
Takbo NANG takbo si Eric kaya siya napagod.
-Eric keeps on running that's why he's tired.
4. as a conjunction (so that)
Kumain ka nang marami NANG (sa ganoon) ikaw ay mabusog.
-Eat a lot so that you'll get full.
*PARA can also be used.
NANG can also be the contraction of "na" and "-ng", "na" and "ang", "na" and "na".
NG:
1. marks the object of the verb.
Kumain kami NG pansit.
-We eat pansit.
Bumili sila NG bagong sasakyan.
-They bought a new car.
2. possession
Tahol nang tahol ang aso NG kapitbahay namin.
-The dog of our neighbor keeps on barking.