Hi,
First option sounds better, but I think DTR must set as low (like in the second option).
Anyway I have never used the W32K mode but I have think you must send the AT commands trough a physical serial port, no GSM/GPRS activity shall be required, all physical ports must be in AT mode, and all DTE of open ports shall be set to low. Check all these conditions are fulfilled.
I don’t know if this helps you. Good luck.