Morendil comments on Prospect Theory: A Framework for Understanding Cognitive Biases - Less Wrong
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Have a gander at Language Log where the "singular they" has been extensively discussed - mostly, apparently, because it's something of a litmus test to determine whether someone is a descriptivist or a prescriptivist grammarian; the LL crowd falling squarely in the descriptivist camp.
The short answer is that it's grammatically plural; it's a "plural of indeterminacy of number" primarily, and has taken on under social pressure an aspect of "plural of indeterminacy of gender". Number one is correct.
ETA: background info.