Hi, i'll try to texture a turtle in WoW style and asked myself how i should do the shading.
To avoid hard edges i would just add 1 sg to all. I tested it with a stone. I think the shading (1 sg to all faces) look bad on any stone. Besides that we have a shot from Diablo and i ask myself - how the achieve #2
is clear - without anti aliasing they would have a hard edge there - but #2
looks detailed and smooth but without bad shading on the flat faces. Here is the diablo screen in fullsize: http://www.cinemablend.com/images/gallery/s22607/diablo_III_12650554582778.jpg