1. The function of a gene is determined by

a.southern blot

b.western blot

c.inserting in trangenic mice

d. inserting as a knock out gene

Knockout : Remove complete or part of the gene from the genome
Knockin : inserting external elements in to the genome like GFP/RFP or LacZ
Transgenic : over expressing particular gene in in vivo, similar way like overexpressing proteins in mammalian cells

When researchers isolate human genes with unknown functions, they can create knockout mice with these genes and observe the results. Instead of creating merely the mouse equivalent of the human gene, researchers are able to reproduce and express actual human genes and their corresponding proteins in mice. Subsequent offspring will inherit not only the instructions coded by their original mouse genome, but also the traits coded for by the inserted human DNA. This helps researchers understand health and disease by observing how genes work in cells.
Knockout mice have many benefits. They not only allow researchers to determine gene function and understand diseases at the molecular level, but they also aid scientists in testing new drugs and devising novel therapies.

http://www.ornl.gov/sci/techresources/Human_Genome/faq/compgen.shtml

Transgenic Mice

One of the simplest ways to study gene function in a mouse is exogenous expression of a protein in some or all tissues. For this type of genetic modification, a new piece of DNA is introduced into the mouse genome. This piece of DNA includes the structural gene of interest, a strong mouse gene promoter and enhancer to allow the gene to be expressed and vector DNA to enable the transgene to be inserted into the mouse genome

Currently, the phrase "transgenic mouse" generally refers to any mouse whose genome contains an inserted piece of DNA, originating from the mouse genome or from the genome of another species, and the term includes the standard transgenic mouse as well as a knockin or knockout mouse http://www.cellmigration.org

According to my opinion Inserting as knock out gene is the best option