Text displayed as an image -- what is the best way to add searchable text?

[chr2014]

Hello to all,

Here's an interesting video (it's only a couple of minutes long):

https://www.youtube.com/watch?feature=player_embedded&v=Ji05CqWi3ws

In this video Matt Cutts, who works for Google, answers this question from a gentleman from the United Kingdom:

"I have removed a lot of text from my site and replaced it with images. My bounce rate has dropped considerably, conversions and time on site are up. Will Google have an issue with the lack of textual content on the site? Does Google still need text?"

My question is:

If you have a large block of text on your web page that is displayed as a graphic image, say 100 words, ten words per line, is it best to:

1) Break the large text block into 5 smaller image blocks, and write the exact text that is displayed in each small block in the ALT tag.

or is it better to:

2) Create a layer and type in the exact text displayed in the large block of image text. Position the layer exactly where the image text is, and make the Z-index a lower number so that it will be behind the image and therefore not visible.

Thanks very much for the help,

Chris