Third Possibility
One of the provisions of the agreements Iraq reached with the UN at the end of the Gulf War was no missiles with > 95 mile range.
If they launch SCUDs on Israel, then it is clear they had the weapons they claim not to have. They lose their credibility in the International Community.
Iraq wins this conflict (even if Saddam loses), if the U.S. doesn't find WMD (or blows up the evidence during the conflict). The U.S. credibility with the UN and the International Community will be completely shot, even worse than the fact that we went without a second resolution.
So, no launches. In fact, as the U.S. built up an armada in the Gulf, I'm sure that Saddam was either hiding or destroying lots of stuff.
I really would have rather given Hans Blix about 100,000 troops to secure all facilities considered to possibly be WMD sites simulatneously, and have the security forces monitor every load/unload of trucks from those facilities.
The U.S. will probably destroy most the WMD as they bomb facilities. Iraqi leadership may even "lead" U.S. bombs to those facilities through false intelligence.
Saddam's best gambit would be to ensure everything gets destroyed, get deposed, then as the inspections fail to find WMD, build his case with the UN to support sanctions against the "bully" United States.
Saddam lives, he gets a shot to be returned to power in his country, he obtains the support of the international community, and he makes the U.S. out to be fools with guns.
That is the scenario I'm second most afraid of.