I'd say the correct answer is the second option. Because while he was alive, Poe lived in poverty because he couldn't earn enough writing poems and stories, he also had to get a job as a critic. Only after he died did people start realizing the importance of Poe's work. And King is still alive, and still popular, receiving numerous awards for many of his works.
It is a Adjective Phrase :)
Holden expresses to not be a depresing persoaon but a happy person
When you witness an event you are watching it, when you are part of it, you are physically involved in some way. Hope this helps!