Mr. Kool wrote:

If it's possible, you're both wrong and right.

When I worked at a newpaper I had to edit the police notes section from time to time. Basically, if the police report said "Grand Theft Auto was stolen with a Playstation 2" from some guy, I couldn't correct it with GTA III because we just report what the cop wrote. Anything else other than what the cop writes is bad journalism. Other than that, #2 is pretty much right.

Journalism Bonus: While computer game titles get capitalized, software titles don't, according to the AP Stylebook.