Spark Plug/Ignition Coil: DC Pulse
Scenario #2 is the correct one. 

Without some type of voltage step up a 12V battery can not create a high enough change in current to create a spark. If instead current is set up through the coil and then the path is broken the change in current is orders of magnitude higher. 

To make this circuit practical the addition of a capacitor across the switch is needed to make the switch break clean. This would work like a condenser in a point and breaker automotive ignition.