What happens when S1 is discovered to be an illegal substitute while at bat for B2?

When S1 is discovered to be an illegal substitute while at bat for B2, the appropriate course of action is that S1 is declared out and must leave the game, being restricted to the dugout. This ruling maintains the integrity of the game and ensures that all players participating are eligible according to the rules. The action taken upholds fairness in play and prevents teams from gaining an unfair advantage through improper substitutions. Recognizing a player as an illegal substitute reinforces the adherence to established regulations regarding player eligibility and conduct during the game.

The other possible actions do not align with the rules governing illegal substitutions. Allowing S1 to continue batting, penalizing F2, or allowing the play to continue with no penalties would undermine the enforcement of the rules and the intent behind maintaining a fair competitive environment.