The first consideration is the configuration flexibility of your other emulators.
MAME is very flexible, but some emulators have fixed function keys that you can't re-assign.
That said, most people go with option 1, but some use option 2 for a no-config 4-button neo-geo layout on the row that's closer to them.
The down-side to option 2 is that any 5-6 button fighting games will have to be remapped, but you'll already be doing for the lower row that since you have an 8-button layout instead of the usual 6.
Another option is:
1237
4568
You'll still need to remap to get a 4-in-a row Neo Geo layout, but the rest of MAME will mostly fall into place.
If you try one way and don't like it, you can easily change settings in MAME or re-program the IPac, assuming that doing so will not cause problems with your other emulators.
Scott