For the type of use you're talking about, you're fine with type-2. Type-1 virtualization is better geared toward hosted VM server farms where you're renting out high volume instances. These have the ability to migrate a live instance seemlessly across hardware without any downtime.
When you say "I need to use the host machine like a workstation", what do you mean exactly?
This is a home setup. I have two HDTVs, both with computers attached to them. In my livingroom, I use this computer to play all my movies and video, to watch Netflix and also to do remote work and edit my websites and play games. Here is a screenshot of that machine, with Windows 8 Pro running in VMware, Under The Dome playing in VLC, my Evolution mail and a web browser showing this site (click to enlarge):
The computer in my bedroom (the Acer touchscreen) is used for gaming, as well as the other stuff I do on the main machine. It is connected to my other HDTV via HDMI and I use that to watch movies or TV series from bed. I also use that one more for teleconferencing. I have been accessing the VMs living on the main machine and opening them up on an instance of Workstation 10 installed on the bedroom computer.
I do not have a third machine I can use to act as a VMware master host, as it would require a robust processor with VT and at least 16gb of RAM. I can easily move the SATA drives to another host machine, but like I said, I dont have the third machine.