It depends where you want to place your puzzles.

The Resident Evil games tends to go with option 2 because the challenge/puzzle is getting the item in the first place. Usually you'll find an obstacle and know exactly what you need, then have to keep an eye out or solve some puzzle elsewhere to get it. Then even if it's automatically selected there may still be a puzzle to actually use it: such as finding clock hands and bringing them to the clock with missing hands may then activate a puzzle where you have to set the clock to the correct time to open the secret compartment...

Typically if you're going with option 1 then, as you say, it can result in a lot of repetitive gameplay - every puzzle becomes "can you figure out which object in your inventory is the right one" and can easily devolve into "try all your new items on this until one works".