Here are some of the reasons that I gave in favor of option 2:
1) This passage is an answer to the question "Did that which was good [the Law], then, become death to me?" Paul is not interested here in discussing the current Christian struggle with sin. He is interested in explaining how the OT Law was used by sin to bring death to pre-Christians (this is related to "the law of sin and death").
2) Paul knows that Christians struggle with sin. But he discusses this in Romans 8:10-14 - and he has a very different take on the struggle there.
3) Every phrase that describes the "me" of Rom 7:13-25 is used to describe non-Christians or pre-Christian Jews elsewhere in Romans; further, each of those phrases contradicts what Paul says about Christians in Romans.
7:14 "I am fleshly, sold into bondage to sin." Compare to 7:5, "we were in the flesh;" 6:18 "we were freed from sin;" 6:20 "we were slaves to sin;" 8:9 "you are not in the flesh but in the Spirit."
7:16 "I agree with the Law, that the Law is good." (often used to assert that Paul is talking about Christians.) Compare to 2:17 "If you call yourself a Jew and rely on the Law...;" 7:4 "You died to the Law."
7:19 "I practice the very evil I do not want." Compare to 6:14 "Sin will have no mastery over you."
7:23 "a different law... making me a prisoner of the law of sin." Compare to 6:22 "but now, freed from sin and enslaved to God;" 8:2 "For in Christ Jesus, the law of the Spirit of life has set you free from the law of sin and death."
Finally, I argued that Paul's theology in general does not support the interpretation that 7:13-25 refers to the Christian struggle with sin. Paul's normal approach to the Christian struggle is this: because of our union with Christ, we are saints; we have transferred from death to life, from sin to righteousness, from Adam to Christ, from Law to grace, from Law to Spirit. The way to deal with ongoing sin is to recognize that sin is inconsistent with our new identity in Christ, and to act in accordance with that new identity. We are dead to sin, so we should act dead to sin.
If option 1 is correct, Paul is presenting the Christian struggle in a way that he never presents it anywhere else in his letters: he is saying that we are still sinners by nature, we are still slaves to sin, we are still trying to keep the Law, and we are still under the law of sin and death.
This is the opposite of what Paul says in the next chapter: we are not in the flesh, we are in the Spirit, we are under no obligation to the flesh, and we can put the deeds of the body to death by the power of the Spirit.
That, my friends, is good news.
The picture: The Apostle Paul, in Entschuoldigung by Matthias Flacius Illyricus, 1549.