Option 3 is what most people expected and wanted. Same number of pixels, either retina at 3.7" or slightly lower at 4". I don't think anybody in their potential customer user base was thinking of funky extra space for widgets
You'll need to properly explain how you drew those conclusions for 1 and 2. The landscape keyboard would definitely need to be changed for option 1 as well. Everyone likes to post mockups of how twitter and Facebook apps would look so nice in portrait 1 with the extra scrolling content but in landscape mode the apps would look messed up. All developers, not just game developers and other developers with custom UI, would need to tweak their designs regardless.
For this rumored 4" screen (option 1), the indications are Apple is just taking the same PPI density sheets used right now in manufacturing and cutting out screens with the same width and different length. What's stopping them from just cutting out a bigger screen in a 3:2 aspect ratio with the same PPI? There wouldn't be any 'useless border'