1) Work everything out, and pin every feature down beforehand. This is definitely the best way to maintain sanity and ensure that you are all singing from the same hymn sheet.
Unless you're 100% experienced in what you're going to implement, it's really impossible to work every technical aspect out. Of course, deciding on core features and general structure is very important, but how do you specify exactly how a very complex technical feature will work before you've even tried to implement it?