Neither option is valid HTML. Browser behavior and crawler behavior would be unpredictable.

The code would be something like:

Keword 1
  

Should I create new pages to cover related topics or improve an existing page?

My first consideration would be specificity of your topic. How many key words or phrases are you trying to focus? How much content do you have to offer?

Let's use cough syrup as an example (as I reach for my bottle). If your company name is Nature's Relief and you offer Nature's Cough Syrup as your product then one well presented page would probably be best.

If you are Robitussin and have 5 different cough syrups and brand yourself on "a different syrup for different coughs" then I would definitely recommend a separate page for each product. The first page might target keywords such as "hacking cough" which the next page might work along the lines of cough and nasal decongestant.

A final thought. If you provide Nature's Cough Syrup and are trying to compete with a competitor like Robitussin, then I would try to be creative and offer separate pages focusing on my competitor's key words. You can offer testimonials or examples where your product relieved a hacking cough, targeting the same key word.

In summary, step back and determine what your goals are for the page. First and foremost, how can you present the page to provide the best user experience. The next thought should be why are you making a change?