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Proceed with Option 1. Personal statements should be positive and focus upon your unique story or attributes you will bring to law school. Addendums are great for explaining your weaknesses in a positive light to add context to your application.
Law schools do like an upward trend. While not as extreme as your case, I had a 3.0 my first 2 years and a 3.9+ my last two and my final gpa was a 3.5 but I got into several great schools (Berkeley, Columbia, Chicago, etc.) as law schools focused on my latest grades plus my other strong factors (LSAT, good recs, etc.). So keep up your strong grade trend and you will make your past mistakes forgivable.
Note that I decided to a year off before law school so all of my recent grades could be viewed instead of just one year if I applied early in my Senior year. Best of luck,
Ken
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