Thanks for the replies.
Basically my dilemma is this:
What looks worse: 4 average grades or 3 pretty good grades and a fail?
Almost always the latter would look worse. Your first year grades don't matter
that much, but you don't want to be failing subjects. What subject is it anyway?
Plus, you have to pay for the subject twice. Nobody wants to pay for something twice.
edit: It's worth pointing out that failing a single subject can disqualify or hinder your access to a lot of things - for example, I think exchange is a H3 average and no fails (although you'll probably be able to talk your way in with a H1 average and a single fail.) Fifty years from now, nobodies going to care, but in the present a single fail doesn't look good.
Most first year subjects you should be able to at least pass as long as you put in a decent effort in swotvac.