Personally, take option 2. If you have someone with sergical hands and you work carefully, you can really grease up the tap and it will catch 95% of the metal shavings while you tape out the hole (i.e. leave the head on the motor). When you put the coil in you have to knock off the tang and that's going into the cylinder. Find out if it's magnetic, maybe you can fish it out with a magnet when you're done. Then get a shop vac and a small rubber hose and try to vac out anything else that fell into the cylinder. Not a perfect solution, but if money is an issue and you're really careful you might be able to get away with it.

PS-> Are you sure all the threads are gone? It seems unlikely that more than just the top couple of threads would be damaged; unless the guys at the shop tried to ram a new plug in before cleaning it up with a greasy tap.