I would go with option 1 if you want to install minimin things. This will install runtime once and you are done. You can run any programs just by copying exe and uir files.
Distribution kit is more for rolling out your software. (Just like installing freeware from web) and when you have updated copy of your software you have to install it again.
with option #1 just delete two files and copy two files and you are done.
Sheetal
Thanks.
CVI 2010
LabVIEW 2011 SP1
Vision Builder AI 2011 SP1