I think you should visit the A50 thread to discuss this, but:
Your 2 scenarios, as stated, e.g. negotiating like silly buggers or realists, IMO, demonstrates a worrying acceptance that the EU are all-powerful and we must just accept what they demand
The EU's negotiating mandate is one of a total EU Win and the UK get badly punished outcome - why do you think that this should just be accepted by the UK?
The Labour position, as set out in the leaked manifesto, essentially does hand over acceptance to whatever the EU demands and invites them to be as unreasonable as they want - and they will, IMO, be so punishing that we end up effectively or indeed actually staying in
It would be the EU playing sill buggers and the UK, under Labour's position, just bending over