I'm with the ones who believe #2 is correct. I can't find anywhere in the rules relating to first touching where it delineates between the right to keep the ball and the right to the spot of the ball. Thus the statement "the right of R to take the ball at the spot of first touching by K is canceled..." to me means that the entire right is canceled and thus R no longer has the choice.
So K legally possesses the ball per 6-2-4 and I would award a new series per 5-1-3d. K would decline the foul by R since accepting would leave R in possession. First-and-10 for K at the spot of recovery.
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I'm not getting older...these high school kids just keep getting younger and younger
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