The second place candidate drops out option is unpopular because it's describing how May became leader, and large parts of the party are still residually traumatised by May's electoral collapse in 2017 - if you'll cast your mind back a few days to the last tory leadership election, the same tory bores who're pomping about the primacy of MPs in a parliamentary system were equally insistent that a full leadership election campaign was required, as the focus of the campaign would quickly expose any weak candidates, which hadn't happened with May. They even made the candidates commit to going the full course and promise not to drop out iirc. While we can see now that a lack of scrutiny by the members wasn't the problem after all, they still have a knee-jerk reaction to it, I reckon.
The top option is just a fantasy anyway though: how do they imagine a unity candidate might be decided on, except through some sort of internal process in the PCP, with the MPs with lower amounts of support dropping out? How else could this kind of thing be agreed within any party, let alone this party, this week? How do they imagine politics actually works?