UDP Server Discovery - Should clients send multicasts to find server or should server send regular beacon?

I've used option #2 in the past several times. It works well for simple network topologies. We did see some throughput problems when UDP datagrams exceeded the Ethernet MTU resulting in a large amount of fragmentation.

The largest problem that we have seen is that multicast discovery breaks down in larger topologies since many routers are configured to block multicast traffic.

I would recommend method #2, as it is likely (depending on the application) that you will have far more clients than you will servers. By having the server send out a beacon, you only send one packet every so often, rather than one packet for each client.

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