Design for periodic data cuts
Your question implies that you're using a Kimball Star Schema approach.  Option 1 implies a star schema while option 2 implies a more snowflaked design.  Kimball argues against snowflaking your design.  

Therefore, go with option one.  It will be easier for your report writers long term and newer in memory database technologies will take advantage of it.  While you're implementing option one, switch to a surrogate key instead of the multi-field key you're concerned about creating.