i think the developers -expected- the first one, but put the second option in there because, like you said, it's more fun. i really believe that some of the secrets in Spyro games were set up for people.

think about Fireworks Factory in the 3rd game: you do the proxy jump, and (if you do it right) you land on top of that ledge. why can you stand on that ledge? why don't you slip? or fall through it? and then you fall down, and the hidden cave is right there. it's not on the other side of the level or anything.

Yes, when there is some "unreachable" place, you fall through the textures, but on some places you can walk happily without accident. I am often thinking about Midnight mountain's  island - I saw video where somebody got to some unreachable places here (of course using gameshark) and there was stable ground... maybe there is also some way to get to that island. (btw there are some lives here - I flew close enough the island to see them)

Anyway, IMO the first one is probably more likely because it looks a lot more achievable. I had no idea you could even get over to where he is. But considering how the camera moves like you're "supposed" to be focusing on Gulp... maybe it is the second one.

think about Fireworks Factory in the 3rd game: you do the proxy jump, and (if you do it right) you land on top of that ledge. why can you stand on that ledge? why don't you slip? or fall through it? and then you fall down, and the hidden cave is right there. it's not on the other side of the level or anything.

2)