I think this depends on which way you learn best. If your test is coming up quickly, I'd say to go with what makes you feel you'll learn more.
One note about approach 1: When I got a wrong answer on the exam simulator, I would thoroughly read through the question and the explanation of the answer. The exam is very much like the exam simulator with situational questions. I found that sometimes I would get an answer wrong in an area where I knew the material well, but didn't understand the question properly. Reading though WHY I selected the wrong answer helped me to identify that sometimes I was missing key words that would have made the answer more clear. Knowing why I got it wrong also helped me to narrow down which areas I was weakest. Also, I'd mark any question for review if I guessed the answer. This way, if I got it right, I would still know to review so that I could confirm that I understood it correctly and didn't just make a lucky guess.
Once I had reviewed my wrong answers, I'd review and study up on the processes where I needed it most. So basically, I was combining both approach 1 and 2. This is very time consuming, but worth it if you have the time!