Pickup measure & repeats

Hi there fellow engravers,
I have a doubt regarding an engraving technical issue.

Which of the two endings is the correct one? I want a repeat from the top. Is ending 1 ok? Or should the last measure be written fully and just run it as a normal repeat without the pickup measure?

The pickup measure is 1 quarter note. Sometimes I've seen the last measure is reduced in value to match the pickup. What is the purpose of that? I hope my explanation makes sense!