The third (and preferrable) option would be to educate the public up to the level where they have enough understanding to appreciate the difference between demagogy and objective analysis and therefore make informed decisions of their own, i.e. elevate them above 'Sun reader' level. There is no need to make everyone an expert, just give them enough education to be able to distinguish facts from bullshit.
This makes the rather massive assumption that this is in fact possible. My extensive (albeit subjective) experience suggests that there is not a hope in hell that it is even remotely possible. People are stupid and insanely biased.
Western countries have managed to achieve a level of government where that stupidity and insanity is largely contained, and episodes such as the Iraq war are simply a result of releasing the pressure somewhat.
And should the UK ever turn into a democracy such as you envision, I will retire to my island base, and nuke the UK from orbit - it's the only way to be sure...