Eather the project is reborn, and becomes stable again, or everything that is game worthy is released.. Or everything is released in a package. Its a win, win, win situation.
By that you mean a "Neither winning nor losing"-"lose"-"lose slightly less", right?
It's a terrible shame that the original team couldn't complete it, but as most people believe, better someone do it rather than it sit there neglected. If only the worthy stuff is released, there's still a crap load of stuff that's there, but we don't know about. We wouldn't be able to try and continue the project if we had any respect for them. The only thing that makes the option you said last less bad is the fact that we'll be able to restart the project.
In my most humble opinion, if option 1 is chosen, we can make an un-official continuation project at best
If option 2 is chosen, they clearly either don't believe it could be satisfactorily continued or they don't want people trying to finish it. Either way, for some reason, they don't want a new dev team taking over for one or more of various reasons.
If option 3 is chosen, then the team will continue with the exact material that the original team left off with, and hopefully the occasional input of the original developers. Option 3 would be an official rebirth of the project, and IMHO the best choice.