That'd be the second one, I think. The only way that could happen is if Visser raped her in his human morph or if Rachel for some strange reason liked evil people, which is apparently not that uncommon between girls.
On the other hand, I'd love to see an andalite baby, don't you think they'd be cute? Maybe they don't have tail blades yet or that'd be painful for the mother. But maybe that's off topic