I actually like 2. I wish more things used 2.
My keys are plenty strong, but when I mistype a strong key (which is plausible seeing as I can't see what I'm typing) then I'm fine with sacrificing some strength to just accept it. My key is already well beyond practical attack anyway.
That said, if you WERE to use something like 2, you'd have to be much more diligent about enforcing good passwords, also you'd have to come up with some kinda scheme that could work with "close enough" and not reveal information about the password.