Awakening question

First off, I have to say -- this game is spectacular. However, I'm confused about one thing: What happens to a Dreamer's influence deck after Step 6 of Awakening? I think there are two options:

1. The rebuilt deck remains in the Dreamer's Discard pile at the right side of the Dreamer board. At the beginning of the next Slumber or Dream, during the Draw phase, the Dreamer Reshuffles the deck and takes the Reshuffle penalty (Seal 3 cards, take 1 damage, or pay 1 money).

2. The rebuilt deck is reshuffled and placed in the Dreamer's Influence Deck at the left side of the Dreamer board. At the beginning of the next Slumber or Dream, during the Draw phase, during the Draw phase, the Dreamer draws 4 cards.

I've been playing with Option 2 because it seems weird to have to take Reshuffle penalties after resolving an Awakening. But is that right?