The answer is 1). Originally,　”かなう” has a lot of meanings and here, it means "be competitive". And, in this sentence, かなう(competitive) +　”ない”(not)　=＞　”かなわない” (not competitive) So, the full translation is 1543年、火縄銃が登場し、石火矢ではかなわない。 In 1543m Hinawa-juu emerge, Ishibiya couldn't be competitive with Hinawa-juu.

It's means 火縄銃 is better than 石火矢。 火縄銃が登場し、（火縄銃には）石火矢ではかなわない。 「かなわない」 concern 「火縄銃には」. I can't speak English, so I can't explain in detail...Je suis désolé.

Correct answer is No.1. " 火 " is " か ". The word "石火矢" is " 石　か　矢 ", "　か " means " or ". So correcct sentence is " 石　や　矢　(など) ". That means stones(small one and big one) , arrows , and so on.

I'm also confused with this...

Shouldn't it be 石火矢　に　はかなわない？