Is there a way to put the face in the second version? That is my preferred method.
I do like the smaller boxes over characters heads. I don't mind the text jumping around at all. I think it helps the player to associate the text with the sprite currently speaking. Some scripts even have a comic icon pointing to the character speaking. I suppose it boils down to preference. I'm not sure what people in general like.
If it's a choice between the first and the second without a face picture, I personally find it a tossup.