I vote No. 1.
I have no problem with the head-down position of the horse. For me, there does not need to be a literal visual representation of WHY that gesture is there. ... I automatically assume "eating grass" -- what else is a horse gonna do with its head down, if no obvious water pond is there?
Understating the background in a blur, to me, would keep it simple in an elegant sense, and I predict would keep the focus strong, increasing the power of the piece.
Of course, those are just words. ... We all know how reality goes. (^_^)