Connecting two "USB C" hosts, what happens?
The answer depends on whether the host ports are regular host ports, or "Dual-Role Ports" (DRP), at least one of them.
If both ports are regular host ports, nothing will happen, so (1) is true. (because both ports will have pull-ups on CC pin, and this will not trigger any host reaction, VBUS will not be asserted).
If one of the ports (like in some modern tablets/phones) is DRP, the DRP port will alternate its CC function trying to pretend as host, then as device, and so forth. Depending on the other port, right connection will be established. So the answer is (3).
If both ports are DRP, the (3) is still true, just the role of devices will be determined at random, depending on cable plug-in time relative to CC cycle.
These are SPECIFICATIONS for the Type-C connector.
According to here, nothing bad will happen as long as both USB Type-C ports work to the specification. So option (1) of your list.
To summarise that blog post in case the link ever dies, he essentially explains section 2.3.1 of the Type-C specification:
Image from the linked blog post.
What this says is that unlike earlier USB ports, the USB Type-C specification mandates that power is not applied to the port until CC pin detection is complete. There are basically two pins in the USB Type-C cable which can be used to passively detect whether a device is a host or a slave using resistors without enabling the VBus supply.
Only once a host (DFP) detects that a slave (UFP) has been attached will it start enumeration and enable the VBus supply.
As a result, when you plug two compliant hosts together, nothing at all will happen as neither detects a slave on the other end, so power is not applied (preventing shorting of supplies) and no signalling is performed (preventing bus contention). This would be option (2) from your list.
If however the device is a (cheap) clone of something which is non-compliant to the specification, who knows what will happen. If for example you get a USB Type-C phone charger and it isn't designed to spec, it may always enable the bus voltage, which could cause damage. That is just speculation though.