If you'd asked me earlier on in the rp I definitely would of picked option two as it does seem like an awesome concept. As it is I'm now invested in this story/characters but I can't help but worry things at the moment just aren't going anywhere, I think these Rp's work best when there's a big event to kick things off for people to react on rather than a sandbox starting during peacetime. Argh, this is a tough decision. 

Yeah, screw it lets go with option two. Giving each of the great houses independence will make for a really interesting rp rather than coming up with various reasons for them to act independently and the setting just invites the right kind of political rp we want. Even if I have to agonize over character creation once again.