Third possibility: update with lower price and an A6.
I think the third possibility, which you overlooked, is the winner.
An A6 in 2014 won't cut it, at all. It's a 2 year-old chip, I'll say they would at least go with the A7 as the 64 bit would be the future, and A8 would probably debut in the new iPhone 6 this year.
I'm ok if the price remains as it is. If it's reduced, even better.