We've been discussing it elsewhere and I think the best solution is the simplest one for now. If we need complexities (e.g. mass STRING_SET padding) down the road, maybe those can be implemented later but aren't strictly needed at present IMO.
As Miloch says, all things considered, the third solution is probably the best. I would just change the prompt to something more exhaustive.
Yeah, there have been some developments on the subject that I have not made public. BGEE support is pretty far along towards being implemented as per the proposal where the user is asked for which TLK to install to. Some surrounding concerns remain to be taken care of. I think I'm abandoning padding, because it turns out it's not really necessary, or something (all mod-added strings would need to be reinstalled when language is changed, so where you start adding strings doesn't much matter. You would be more likely to lose saved-game compatibility on switching language, but I don't think I could guarantee that anyway, due to deduplication). The ask-for-lang-dir text is rather basic at this point, but I can certainly pile it on. It is translatable, btw, and displayed after you select mod language.
Maybe I have forgotten something, but I think that's it.