Hard to say which is the "best" option Flea but sounds like #1 would be the smartest although I dont know why you think you will lose 10k in equity right now by going that route? Ask for a low or no cost loan if you think you will be out of the house in less than 3 years, go with a standard, fair fee and lowest rate loan if you intend to stick it out for 3+ years.

Bad time to sell so I would get the most important improvements done ie roof and windows then put the rest together over time as you budget allows...2c.