I vote for option one. Honestly though it's more because it feels more pokemonish to me. One of the things I really like about this game so far is it doesn't feel like a Jamjar so much as my character IS getting the experience I get to a degree while I play the game. Only Vash gets even more immersion.

I think that if everyone can speak to the npcs without difficulty, the same should go for other characters. But, that's just my opinion.