Answer

If you were asking for my personal opinion, I would say it is the second explanation, the more rationalist one. But what does the Talmud mean? Here it seems to me that the meaning is the first one.
The practical difference is whether to exempt them from other taxes as well—for the needs of the city, unrelated to security and guarding.
By the way, there are two shades of the rationalist explanation: 1. The burden is not imposed on Torah scholars in order to make them more “valuable.” 2. Because of their learning they do not have money, so they are supported so that people will not refrain from dedicating their lives to Torah study.
However, it seems that all this depends on the different reasons that appear there in the Talmud. “Those engaged in sacred work” sounds like a reason of reward and honor, not because they do not need protection. By contrast, “the rabbis do not need guarding” sounds like the second reason.
Even within the reason that they do not need guarding, one should distinguish between Rabbi Yohanan and Resh Lakish. One explains that they do not need protection, while the other says that they protect the whole city (that is, they contribute their share through learning). If we are talking about protecting the whole city, there is room to see this in a non-mystical way. Torah gives the community a purpose and a reason for its existence, and in that way it protects it.