I have tried all three methods.
1. Didnt work. Either the pins were too small to hold the rack on securely or they were too big and interfered with the spur gear.
2. Worked fine for about a month. Then I started to get play in the rack.
3. Worked fine for about a week. Then the rack moved without moving the rails.
In the end I went for a combination of 2 and 3. A routed channel with glue to hold the rack in place (I used araldite impact adhesive). Worked perfectly. You just have to watch that you get the channel perfectly level. I couldn't do this with my hand router and ended up milling it out on the lathe with a small routing cutter.
PS Where did you get the rack and pinions from?
After seeing the prices everyone seems to want for them I made my own.
Next time I will DEFINATELY buy them!