Does that mean you draw 2 cards, keep 1 and discard the other, or do you draw 2 cards, add them to your hand, discard any card you choose from your hand, then play a card?

A: The latter. It’s kind of like a game of Fluxx, if the rules at the time were Draw 2 plus a New Rule called Discard 1 which, if it existed, would require you to discard 1 card between the Draw and Play parts of your turn.