Disclaimer: I know nothing about business other than what I obseved while working for a one-person company last summer, so this is just my personal perspective:
Well, talking specifically about small businesses (I'm considering anything up to maybe 20 employees) that do *not* have anything to do with technology (i.e. computer is tool, not platform) I'd suggest option 1. This especially applies to newly forming companies. From what I've read about schools switching to linux, the first month will be hard with lots of questions and complaints (even if you have a company training session/day), and not being completely fine until about 3 months. The only big issue I see is with the accounting department, who often use proprietary software for their jobs. Really I suspect GnuCash is sufficient for their needs as it's well written with tons of features for both home and business use, but that would probably be the biggest learning curve (though no different than switching proprietary accounting software and you can guarantee them they'll never have to learn another system again) so try to get them onto it on windows first, before migrating the whole company.
In fact that goes for everything: convert everyone to the cross-platform FOSS solutions first (e.g. openoffice, firefox) on windows, then it should be a much simpler migration when jumping to linux. This should always be your first step for any planned migration.
For small businesses that are to do with technology, you need to consider if their proprietary technologies (whether software or hardware) will be supported under linux.
2 always sounds like a good idea, but in reality the employees would just boot into windows. A better idea (if your hardware can handle it) would be to provide linux, with a virtual machine for windows, allowing them to jump to their comfort zone if necessary.
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