That's probably the way we'll have it, but there will be artificial-natural habitat, eg. "reservations", that could grow to even be country-sized or half-continent-sized if we manage resources right. (Though probably they'll be smaller since we're going to have to some pretty large scale heavily-engineered-and-very-unnatural-agriculture to prevent famine in the face of climate degradation.)
The second option sounds somewhat enticing... but it would likely severely diminish speed of technological progress, hence diminish our even-longer-term changes of survival (think encounter and warfare with alien civs etc. - the universe is huge and if we/our-mostly-artificial-descendants survive long enough we'll have to compete with strains of life much more virulent than ourselves today).