Ha, both are correct depending on what you mean to say. "Without ostentation" can be taken as a synonym for humble, so it's a bit redundant, but 1. still makes sense.
2. They lived humbly without ostentation implies that there is a way to be ostentatiously humble. Many religious leaders are attacked for their ostentatious (presumably false) humility. The people in sentence 2 are, then, truly humble, not faking it. A comma turns 2. into the equivalent of 1.: They lived humbly, without ostentation.