I have a stored procedure that does some parameter validation and should fail and stop execution if the parameter is not valid.
My first approach for error checking look
As you can see from this answer history I followed this question and accepted answer, and then proceeded to 'invent' a solution that was basically the same as your second approach.
Caffeine is my main source of energy, due to the fact that I spend most of my life half-asleep as I spend far too much time coding; thus I didn't realise my faux-pas until you rightly pointed it out.
Therefore, for the record, I prefer your second approach: using an SP to raise the current error, and then using a TRY/CATCH around your parameter validation.
It reduces the need for all the IF/BEGIN/END blocks and therefore reduces the line count as well as puts the focus back on the validation. When reading through the code for the SP it's important to be able to see the tests being performed on the parameters; all the extra syntactic fluff to satisfy the SQL parser just gets in the way, in my opinion.