Hi Beth,
That's a good question! I agree with your both understandings of 见鬼.
见鬼 is used as an exclamation (sometimes a vehement expression of complaint). 鬼 is usually associated with mysterious things. So when one came across something odd, he or she would say "见鬼了!怎么会这样?" which means "that's odd! Why is that?" or "damn it! Why is that?"
Secondly, 见鬼 can be interpreted literally as "to meet ghosts" or "to go to hell". You might hear one of the lines from TV shows says, “让这些害人精见鬼去吧” meaning "let these bad guys meet ghosts".
On your particular questions, I rarely say 见鬼 in Mandarin, would probably use it more often in Cantonese. It's not that offensive if you use it to show surprise, but I wouldn't use it in front of kids. You will hear it from TV shows more frequently than in daily conversations, I suppose.
I've read a reference regarding the usage of "鬼", and taken some notes as follows which might conclude how 鬼 is used in other ways. Hope it explains a bit more.
1) 鬼 as a reference to indicate "who"
“鬼”作为指示代词时,表示“谁、哪个”
Example:
鬼去咩!(Cantonese)
谁会去啊!(Mandarin)
Who (the hell) would go? (English)
2) 鬼 as an adverb to describe something to a certain degree
“鬼”作为副词时,表示“很、非常”
Example:
鬼咁靚 (Cantonese)
好漂亮 (Mandarin)
Stunningly gorgeous (English)
3) 鬼 as a noun to describe a person
“鬼”作为名词时,表示“家伙、东西”
Examples:
衰鬼 — 坏家伙 - bad guy
鹹濕鬼 — 好色的人 - pervert
大頭鬼 — 有钱人 - rich guy
咩鬼 — 什么东西 - What (the hell) is that?
小鬼唔見得大神 — 人在大场面怯场 - small potatoes feeling inferior in front of bigwigs