I’ve always taken this it mean close to your #2 – that intentions without action are no better than bad actions, often as expressed as, “I wanted to do X, but…” The “but” is followed by some excuse that belies the “wanted to” part of the statement. If you truly wanted to, you would have. So you were lying about your true intention and were thus bad. Plus you may have let a bad situation get worse, hurting others, so your blame is doubled. If you are honest — “I saw it happen but I was afraid to get involved” — you’re at least not making excuses for your response. This is arguably less bad.
Does the vest symbol mean the dog emits wifi? woofi?