I would go for the first one, horizontal split although this is an unusual layout settings. I would normally associate the left sidebar with navigation or filtering features. At first glance witout reading, I thought your left pane is used to filter the content on the right (Settings), probably due to my mental model of a side pane.
I have propose an alternate solution for your reference.
download bmml source – Wireframes created with Balsamiq Mockups
User are more accustom to reading from top to bottom. The flow of information also makes a bit more sense here. Since its a modal window, screen estate is very crucial. By having the selection box inside settings, you need to scroll just one pane instead of two.