Very interesting post. There's a lot of stuff there that I never noticed or thought much about.
I always assumed it was something like option 1-i, but perhaps that it was the Tuurngait hivemind putting him through these tests in his mind, but your explanation of him going through his redemption seems more likely. Even though some things make no sense with this scenario I think it seems to be the best bet.
If you really want to know perhaps you could send an email to the writer,
Tom Jubert and see if he wants to clarify things for you. Although the devs seems to have a policy of not answering questions about the game's plot, it might be worth a try.