The more I think about it. The more number three makes sense to me. A closing quote indicates the speaker stopped talking. Until you see that indicator, the same speaker is still going.
Quote:
Originally Posted by HarryT
I would add that #3, although correct, generally confuses the hell out of tools which try to "smarten" punctuation (ie replace straight quotes with curly ones). The smarten punctuation tool in Calibre, for example, puts a close quote instead of an open quote at the start of the 2nd and subsequent paragraphs in the continued quote.
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Not to mention playing hell with my personal regex.

This is a big part of why I asked the question in the first place.