I'd go for 1 and 3.
It depends on what I am shooting. Normally I just shoot, and show a "harmless" smile if the subject notices. In case anyone around looks concerned or uneasy, I'd try to ask nicely and if refused, I'd simply stop shooting that subject. Sometimes people are interested just how they look in the photo and I'm willing to show them on the spot since I run on digital. Also offer to send them a digital copy if they seem to like the photo.