Relation to original tables or to existing linking table
Andriy already said most of it, so I'll just be short.
After your description, settings come to existance upon the condition that a guest and an event are already linked, therefore option 1 would be choice, for that model will convey that concept to anyone viewing it.
There is some talk about surrogate vs composite keys. Anyway, Smaller PK => smaller indexes, but as in your case you'll be going with int surrogate keys for guests and events tables, then the composite key will also be small, meaning that performance loss potential against surrogate key is small, especially if you'll be searching by guest/event.
The composite key, on the other hand, will give more meaning to the key.