I think second option "Nokia Board must fire Stephen Elop and embrace Android." is the right way forward. All is still not lost for Nokia. It still is a good brand although its value has been somewhat diluted in past few years. Windows phone is a risky proposition and if it fails it will hurt Nokia more than Microsoft itself.
Elop talks bullshit about anything that Nokia/Microsoft cannot offer. He said "You don't need a quad core phone unless you need to keep your hands warm in your pocket." Why? Because Windows Phone doesn't support more than one CPU core. It doesn't have other fundamental features either. Here's an interesting article on Elop's balltalk : http://www.theregister.co.uk/2012/02/21/ubuntu_for_android/