When I run tests using a database, I usually use an in-memory SQLite database.
Using an in memory db generally makes the tests quicker.
Also it is easy to maintain, because the database is "gone" after you close the connection to it.
In the test setup, I set up the db connection and I create the database schema.
In the test, I insert the data needed by the test. (your option a))
In the test teardown, I close the connection to the db.
I used this approach successfully for my NHibernate applications (howto 1 | howto 2 + nice summary), but I'm not that familiar with Linq2SQL.
Some pointers on running SQLite and Linq2SQL are on SO (link 1 | link 2).
Some people argue that a test using a database isn't a unit test. Regardless, I belief that there are situations where you want automated testing using a database:
- You can have an architecture / design, where the database is hard to mock out, for instance when using an ActiveRecord pattern, or when you're using Linq2SQL (although there is an interesting solution in one of the comments to Peter's answer)
- You want to run integration tests, with the complete system of application and database