Must be option 1 (your first paragraph above) then - I'm sure there's no way Dundee could be shelling out £200K plus for a full back!I've done a bit more reading on the subject.
Dundee may not have to pay it if they are considered a category 4 club by the Scottish FA. This isn't just based on the category their academy falls under, but FIFA instructed national FAs to split their clubs up into a 4 tier level based on each clubs investment at youth level. Clubs considered cat 4 by their own national FA don't have to pay the training and development compensation fees.
If they have to pay it, I have no idea how they'd afford it, but they'd know it's an added cost of signing a player from a club under another national FA (this isn't part of the overall transfer fee but a separate payment). I may be slightly wrong about how much Reading get as between the ages of 12 and 15 it appears as though between the ages of 12 and 15 the payment is calculated at the lowest category no matter what ranked academy the player is at (however this isn't mentioned in every article i've read about it, but is on one of the top sporting solicitors write up).