#2 is the activity that is actually done? I need to get more (or not).
Huh. I’ve only ever heard, “go pound sand up your ass” when it’s not the shorter form.
Have always taken it as in the sense of comparing the person to all they can do in this situation to get their way is act as a toddler and stomp (the ground) as if having a tantrum, they are still not going to get what they want.
I take it to mean, “Go away and this pointless task and see where it gets you - ie, nowhere.”
The mental image has always amused me. I picture a person being told to go pound sand sitting on a beach with an array of mallets and paddles around him. He’s worked up quite a sweat and thinks to himself, “Well, this is far less effective than I was led to believe…”
A standard punishment for prisoners was to break rock.
Big rocks would be broken into smaller rocks. Small rocks into gravel. Gravel into sand. The products of each step actually being useful.
But what if you wanted the prisoner to continue on for no good reason other than punishment? Then you could make them “pound sand”.
I meant #3.
Yes, rats do make and live in holes, and one way of dealing with them is filling them in or blocking them.
Blocking them just encourages the try for the 2-point conversion later.
I always kinda figured it had something to do with pounding sand into molds for casting.
I’ve always understood it as #1: Get lost, hit the road, buzz off. Your feet are pounding the sand as you walk away, dismissed and ignored.
I’m astounded that people have other interpretations. “Pound sand up your ass” makes no sense. 
In high school I had a friend who’s dad would always use weird saying like this but mix them up with other things until they were just ridiculous. The one I remember relating to this when we were goofing off one day was “if you wanna pound sand then you can just go to the north pole and pound all the sand that you want!”
We asked what he was talking about and he said “if you don’t understand i can’t help you”
Perhaps using sand to make a rammed earth floor/wall would be a useless effort.
Really? Just how many of your acquaintances do this? Is it a sole or group activity? Inquiring minds want to know. 
I’ve always taken it to mean “hit the pavement” or “take a hike” but the idea of a pointless menial task works even better for me.
Zeke*
*Ass-sand free since 1973
Sorry, posted before I read the whole thread.
Still eh? Wink wink, nudge nudge.