When I am driving on smooth straight road at say 100 km/hr and I realize I want to stop at say 1 km ahead (assume that there is no other vehicle ahead or behind). I can continue at same speed or little less speed, and later apply break when I want to stop. But that means I waste some fuel.
To avoid that, when I realize that I want to stop 1 km ahead, I can take off my foot from accelerator, and
1. Fully press the clutch. As speed decreases, car will gradually stop (and I may apply break to bring is to complete rest at right spot). Change gear from top to neutral position after complete stop.
In this case, if car looses speed too early, when speed need to be increased, put gear in appropriate level and release clutch, apply accelerator to gain speed, and then again fully press clutch to repeat the process.
2. Fully press the clutch, and as the speed decreases, keep lowering gears. Finally change gear to neutral position after complete stop. In this case, although I have to keep lowering the gears, if need arises to increase speed, I am already in right gear.
3. Fully press the clutch and move to neutral gear and fully release the clutch. As speed decreases, car will gradually stop.
In this case, if car looses speed too early, when speed need to be increased, press the clutch, put gear in appropriate level and release clutch, apply accelerator to gain some speed, and then repeat the process
4. Press clutch, move to lover gear, release clutch and repeat these steps as speed decreased. Finally change gear to neutral position after complete stop. In this case, car is likely to stop sooner, since car in lower gear will have effect of breaking.

Now, if idea is to save fuel (by lifting foot off accelerator 1 km before stop), how these effect the car (wear & tear of clutch, gears)?

Options 1 and 2 are almost same, only difference is convenience of increasing speed if required. So I guess, comparison is of first two with third & fourth. (In 4th option, since gears help in breaking, they have wear and tear, and I therefore would rather avoid this option.)

And secondly, how exactly ‘riding with clutch’ (foot on clutch but clutch not pressed while at high speed) damage the clutch?

Think of it this way... if the car is in gear, and you're moving, it means the crankshaft is connected to the wheels (through transmission and everything). If the wheels are spinning, and gas is not pressed at all, the wheels will be turning the crankshaft, requiring almost no gas for the engine to work.

However, if you leave the car in neutral, the crankshaft is not connected to the wheels, and the car computer has to inject some amount of fuel for the car not to stall... exactly the same amount as when you're idling at the stop light.

Now you take it into consideration when you think about gas saving.

Riding with clutch... if you have your foot on the clutch, you pressure the clutch pedal which tries to disengage the clutch. It means that maximum pressure is not applied between the pressure plate and the flywheel (I think these are the correct names of the parts involved). That also means that such pressure might not be enough to steadily hold the 2 rotating pieces together, and one might "slip" (rotate at different speed) on another. It would cause wear. To see how a clutch works and to understand this better (with pictures) check out www.howstuffworks.com

Any questions? :)

I would choose option #3. I think that it would save the most fuel. My vehicle has a 6 speed trans. In 6th gear as the car slows down enough it could bring the eng rpm below stall speed. In 3rd or 4th the braking action of the engine would slow the car more than by just coasting in neutral.

Lightly riding the clutch pedal would keep the throwout bearing needlesly engaged, causing it to wear out prematurely.

Also, at a red light, I always put it into neutral, and foot off the clutch. Once my hydraulic slave cylinder failed as I was approaching an intersection. Had I been sitting at a light, when that happened, I would have crashed into the car in front of me.

I would choose option #1 for best fuel economy. The only problem is that coasting in neutral in some areas is illegal.

I'm quite sure that when the engine is above idle (as it is for engine braking) more fuel is used even though the gas pedal is not depressed. The engine is definitely consuming more are above idle and the vehicles ECM (or carbarator) will adjust the fuel/air mixture so that it is not too lean.

Riding the clutch or the break is just plain bad. This happens when your foot is resting on the brake or clutch and the excellerator at the same time.