To add another data point, my wrist is 7.5 inches (19 cm). I went with the large as I had a large Band 1. According to the sizing instructions, I could have gone with the medium, but read on and you'll learn why I didn't.
Band 2 is definitely larger than Band 1. I casually wear mine at the 7th or 8th notch--I have 2-3 notches left on the clasp. At this position, it sits between my wrist bone and hand. When I exercise, I open up the clasp wider and slide it up my arm a little in the direction of my elbow. So it sits above my wrist bone. I found with B1 that it tracked my HR better there.
HR on the B2 is a little flaky so far (three workouts), so I'm still experimenting with the position. But I saw the same thing with B1. Seems like it got better with time. I don't know if it was adjusting or I was just learning the best way to wear it.