On the first matter, leaning to the first option, but as you point out, neither extreme is truly possible in a real world. There is always power, and it will always have some impact on people. Government going away, rather, can be thought of more in lines with a decentralization of that power, but there will always be hot spots, because no grouping of humans is ever going to be perfectly distributed with regard to their means or will to exert influence over each other. What may emerge as the best approximation of no government is a free choice of government, possibly untied from geographic location in some way (though I'm not holding my breath). When people know you're protected by a particular organization, they think twice about infringing upon your protected rights, and likewise, you would generally avoid trying to win one over on someone in defiance of their protective organization.
Part of where bitcoin, or more abstractly, sound money, comes in, is creating a level playing field in the market that allows those power concentrations to be based more around what people find utility in, and perhaps more importantly, punishing economic wastefulness such as unjust wars through the stripping of wealth, and thereby, power.
On the second matter, again, I lean toward the first option, but there are at this point scaling concerns that make it unlikely that bitcoin in its current form could serve as global money for everyone, if only because with current blockspace and transaction size, there's roughly enough space for every one of the 8 billion people on earth to make 2-3 on chain transactions per lifetime. I don't worry that governments can shut it down, as between tor, geographic limitations, and unbreakable cryptography, it's just out of reach. The best they can do is control the fiat offramps (ie, exchanges), which would make it harder for those not in bitcoin yet from getting in, but nothing prevents bitcoiners from exchanging goods and services with each other for the bitcoin they have. As for government taxes, the government can simply do what they've always been able to do in the event of bitcoin maximalism: beat you with a $5 wrench (okay, with inflation, these wrenches now cost around $20...) and throw you in a cell until you give them what they want. The same holds if you're holding your money as fiat paper in a secret location. Most people value their lives more than they value their money, especially when their money becomes unspendable when they've lost their liberty. That said, I do think the way taxes are levied would likely change, as income and capital gains taxes become a bit trickier to track, particularly with people using various privacy practices to obfuscate the currency they've received. There may be taxes on state provided goods and services (think toll roads), taxes on things like vehicle registrations or houses, taxes on imports (tariffs), taxes for special privileges (regulated businesses, health code, etc), or even flat taxes imposed on every citizen governed by a given state. None of this would be outside of what has been seen historically -- if anything, it is modern income taxes that are the relative aberration which did not exist prior to the advent of fiat currency in the first place.
While I do tend to prefer smaller "leave me alone" governance, and Bitcoin removes some of the means government has historically ballooned in size, nothing quite guarantees that you'd have a light handed touch. Just like tyrannical governments existed on the gold standard as well. They just end up having to play by the rules of the market, which likely would have less time for their fiat bullshit and debt expansion (much like the Medicis had no interest in extending credit to sovereigns, until they did, and subsequently saw their banking empire collapse).
