Which is more readable? Keep in mind: this is for a view file.

option1.php

<?php foreach($pages as $page) { ?>
	<div id="<?php echo $page['slug']; ?>" <?php echo $user->uid && $_GET['t'] == $page['slug'] ? "class='current setcurrent'" : ""; ?>>
		<div class="toolbar">
			<h1><?php echo $page['section']; ?></h1>
			<?php if(isset($page['parent'])) { ?>
				<a href="?t=<?php echo $page['parent']; ?>" class="parent">Back</a>
			<?php } else { ?>
				<a id="logout" href="/logout" class="button">Logout</a>
			<?php } ?>
		</div>
		<h2><?php echo $page['title']; ?></h2>
		<?php if(isset($page['content'])) { ?>
			<?php if(is_array($page['content'])) { ?>
				<ul>
					<?php foreach($page['content'] as $content) { ?>
						<?php if(is_array($content)) { ?>
							<li <?php echo isset($content['href']) ? "class='arrow'" : ""; ?>>
								<?php echo isset($content['href']) ? "<a " : "<span "; ?>
									<?php foreach($content as $key => $item) { if($key != "text") { ?>
										<?php echo "$key='$item'"; ?>
									<?php }} ?>
								><?php echo $content['text']; ?>
							<?php echo isset($content['href']) ? "</a>" : "</span>"; ?>
							</li>
						<?php } else { ?>
							<li><?php echo $content; ?></li>
						<?php } ?>
					<?php } ?>
				</ul>
			<?php } else { ?>
				<p><?php echo $page['content']; ?></p>
			<?php } ?>
		<?php } ?>
		<?php if(isset($page['links'])) { ?>
			<ul>
				<?php foreach($page['links'] as $link) { ?>
					<li><a href="?t=<?php echo $link['slug']; ?>"><?php echo $link['title']; ?></a></li>
				<?php } ?>
			</ul>
		<?php } ?>
	</div>
<?php } ?>

option2.php

<?php
	foreach($pages as $page) {
		echo "<div id='{$page['slug']}' ";
		echo $user->uid && $_GET['t'] == $page['slug'] ? "class='current setcurrent'>" : ">";
		echo "<div class='toolbar'><h1>{$page['section']}</h1>";
		if(isset($page['parent'])) {
			echo "<a href='?t={$page['parent']}' class='parent'>Back</a>";
		} else {
			echo "<a id='logout' href='/logout' class='button'>Logout</a>";
		}
		echo "</div>";
		echo "<h2>{$page['title']}</h2>";
		if(isset($page['content'])) {
			if(is_array($page['content'])) {
				echo "<ul>";
				foreach($page['content'] as $content) {
					if(is_array($content)) {
						echo "<li ";
						echo isset($content['href']) ? "class='arrow'><a " : "><span ";
						foreach($content as $key => $item) {
							if($key != "text") {
								echo "$key='$item'";
							}
						}
						echo ">{$content['text']}";
						echo isset($content['href']) ? "</a>" : "</span>";
						echo "</li>";
					} else {
						echo "<li>$content</li>";
					}
				}
				echo "</ul>";
			} else {
				echo "<p>{$page['content']}</p>";
			}
		}
		if(isset($page['links'])) {
			echo "<ul>";
			foreach($page['links'] as $link) {
				echo "<li><a href='?t={$link['slug']}'>{$link['title']}</a></li>";
			}
			echo "</ul>";
		}
		echo "</div>";
	}
?>

Option 2 has fewer characters yes, but you sacrifice any bracket matching / syntax help from your editor... you will inevitably end up with messed up html that will be a pain to fix (especially for someone who is just joining in the project. I find that this really hurts me when I have to use smarty... (question: where does this if statement end? the answer: 4 full pages of text down, I think?)

Personally (you probably already know what is coming) I would make a third option that wraps up some common html elements like links, but if you aren't going to do that, I prefer Option 1 for readability and debugability...

Also I think your usage of the ternary operator, while it does keep the character count down, hurts the readability quite a bit (and you are using ' instead of " for your html attributes! My eyes!!!).