I'd go with the second choice. I currently am using a Samsung evo 250GB as OS drive and game storage. I use my 1TB HDD as storage for non intensive stuff and other data that I do not access frequently.
So, with the 120GB SSD you can run windows and a couple games while the 2TB WD Blue will be a great storage drive. You can even install the games to the HDD and play from there. The performance difference in game load times is noticeable, but not too huge.
The best gains from having an SSD will come from overall system responsiveness.