Option 2 - I would rather slow down and have a head on collision while almost stopped than having a combined speed of over 100 mph - I've seen it and no one wins.
Option 3 - if you had honked, the offender might of had a more panic response and wrecked their vehicle, but at least the offender would have been the only one in the accident. The horn would also warn a person behind you of a potential problem. Always be ready on the horn and practice so it becomes an instinct. After all, that is the purpose of the horn to warn other drivers in situations just as you described.
You were very lucky and things played out best for all. Only in hindsight do your realize that your actions this time were the lucky ones, but may not be the best the next time.