Ultimately, I cannot sanctify myself. I cannot even walk on my own merits (God can strike me lame one second before I decide to walk). But, I do make intentions to walk & they have been very successful, historically.
IMO, your first alternative is far more productive. The second alternative can describe such people as Jimmy Swaggart and the son of that famous preacher who was recently found to be sexually immoral. These types of people engage in long hours of prayer, meditating on God's word and speaking to others about God. Yet, they engage in systematic, long term sinful behaviors. I know of less famous Christians who read the Bible every day and have only friends who are church-goers. Nevertheless, they are completely unaware of their sinfulness or they make excuses for their sinfulness.
The first alternative is productive, the second is futility. I can pray and talk about walking, but until I stand up with the intention to walk, I will not walk. Constant self-examination may be a bit over the top, but I should be working on something. For instance, I have a serious lack of gentleness in my speech; I am currently praying about this, second guessing my speech patterns, and reworking my words to be more gentle. I thank God every evening for my progress, I confess my shortcomings regarding gentleness at the end of each day, and I awake each morning to request God's assistance in my endeavor to be more gentle during the coming day. Just talking to Christians will not lead to gentleness; focused energy and intentions, with God's assistance, will result in me becoming more and more gentle.
I'm more speaking to the extremes shown by some on this forum, others I know IRL.
My experience is that God will bring things to mind, that He is addressing in my life, and in this I follow His lead rather than my own "over-self-examination". Very true, and I don't want to say this wrong, we need to be self-aware. I think this is the primary issue with the ones who claim no sin. When I have occasion to discuss this with them, I quickly find out they tend to have a "short list" of sins, the 10 commandments, the Sermon on the Mount, like that.
My understanding of sin is anything that's not of faith, and is therefore of the flesh. And I've yet to meet a single person who claims sinlessness (or allude to it - some prefer innuendo to imply they are sinless) who does not go on to demonstrate the works of the flesh, usually in some baseless accusation or negative charaterization, sometimes with outright lies.
I think of Acts 2:42, they continued in the breaking of bread, and the doctrine of the Apostles, and prayer, and fellowship.
Personally, I've never found victory over sin by gritting my teeth and holding on to my chair. But I have found victory over sin by remembering I'm forgiven, and that my Faithful Creator loves me, and is here with me, and will never ever leave me!
Reading the Bible, meditation on the Bible, praying to God, fellowshipping with other Christians, all of these things help to keep these truths in my mind, not to mention equipping me, and providing opportunity to serve.
Much love!