I do both.
I'm in the middle of re-writing something at the moment, and I'm making quite big changes. The other day I had one of those panic-stricken episodes where I became convinced all I was doing was making the story worse, not better. I'd just re-written the same scene three times and I still wasn't happy with it. So I stopped and took a moment to think about what it was I wanted to say in the scene. What bit of information was it supposed to convey to the reader? After a bit of deliberation two things came to mind, so I had another go at a fourth re-write and it worked. If I'd just kept ploughing ahead without pausing to consider what I was doing, the whole thing would have got worse and worse.
Once this re-write is finished, I'm going to go back and read it, change anything that needs to be altered and then leave it for a while. I'll probably look at it again in a couple of months and do another re-write, but hopefully it won't be quite so drastic.
Out of the three novels I've written, I only consider one of them 'finished', and that's after two major re-writes and lots of editing.
