I think both work, but 1. sounds more natural to me, a native speaker.
I appreciate Jonathon's point about singular/vs plural, but I hear sentences like "she is still good friends with him," all the time, whereas I almost never hear "she is still a good friend with him". I think it may be an odd construction where 'friends' refers to all the parties. Or it could be just one of the technically incorrect things that has become common usage.