If a transformer is taped from an 800A OCPD using the tap rule in article 240.21(B)(3)(1), when does article 240.21(B)(3)(2) apply.

Okay,

You need to go back and re-read the code.

Article 240.21 - Provides for the positioning of the OCPD. Also, it tells you that these conductors cannot feed other conductors without being connected to another OCPD.

240.21(B) Applies to feeder taps. These taps can be unprotected at their source providing that Sections (B)(1) through (B)(5) are met.

Section 240.21(B) [feeder taps] (3) [over 25 ft. long] must supply a transformer and comply with sub sections (1) through (5) of 240.21(B)(3).

So, it is not when to apply condition (for want of a better word) 2 or condition 1. It is a statement that say all of these conditions must apply.