Hosting & Web Design are two very different beasts.
You need to compare the portfolio offerings of the companies who have quoted you with the type of site you could output from register365.
Is there an appreciable difference in usability / look & feel / customisation options ?
How will it handle backup/recovery ?
If you go with register365 deisign offering, are you stuck with them forever or can you move hosting providers ?
Is it fully customisable for SEO ?
Most importantly will you be able to build a website that will hold peoples attention and draw them into making a purchase on your site rather than bouncing out to the next one on the google search list ?
With option 1 you will be involved in site design and be able to specify exactly what you want. You will also own the site and will be able to move it as required.
Now weigh up the costs - is €249 per annum a fair price or is €2000 + annual hosting (prob no more than €35 per annum) ?