This going to sound like a cliche, but I think the choice that is the least bad is #1.
We are deeply invested in what was a gamble from the beginning, I agree with CTM that this can't be looked at in isolation, if you pull out unilaterally with nothing to fill the vacuum, lots of nasty things can develop throughout the entire region.
The nascent government may not be perfect, but hopefully it will be something. It may not be able to control the whole country, but it may be able to control some of it. This is a weak hand but it is preferable to controlling none of it.
I read the Foreign Affairs acticle and I think there is something deeply unsatisfying about it that my mind hasn't come around to grasping (perhaps it is the scope of the comparison). It is worth the read, however.
Edit: On the Foreign Affairs acticle, I read this a few weeks ago and re-read it today, and I think that the "communal civil war" notion tends to underplay the significance of the regional players. It also seems to be written from the perspective that the Sunni held provinces would emerge as the most detering forces and underplays the both the Shite militias and their ability to enforce law independent of the government. While the militias may be clearly sectarian, they have evolved to fill a security vacuum and are not as one dimensional in their concerns as just grabbing power, with Sistani they represent both a mechanism for some sort of urban security in the minds of the people, and in this light also have grown in their moral suasion. The article seems to think the Al'Sadr is a type of aboration and is not placed in the wider Shite context.