Expected behavior with duplicate NT hosts file entries?

Solution 1:

Only the first will be read. Once the name has been resolved, no further reading of the file takes place.

Solution 2:

Multiple entries with the same domain name is allowed and useful in some scenarios.

As I described in my question, it seems that in "normal" cases, where those addresses are reachable by the same adapter, the first address seems to be the one that is taken. If one of those entries is loopback (127.0.0.1), it might take precedence though.

Sometimes it makes sense to have multiple entries with the same domain name, even when none of the addresses are to the loopback adapter, if the computer is multihomed or multiaddressable. (Thanks JdeBP for the info in the comments on my OP).

a single DNS host name can correspond to more than one IP address if each of the addresses is mapped and used in separate lines. For example, you can add lines for the following multihomed or multiaddressable DNS host computer:

10.0.0.1  host-a.example.microsoft.com
10.0.0.2  host-a.example.microsoft.com
10.0.0.3  host-a.example.microsoft.com

I believe that adapter preference/priority might play a role here (which you can set up in network settings), though I cannot test it out. Loopback will most likely always come first in adapter preference.