I would opt for option 3: Return the bike at their expense and they send out the bike that they sold you in the first place. The refund would have to be more substantial for me to choose the first option. Option 2 is ridiculous, you would have to strip the components off the frame and then rebuild with the new one. Unless they offer to cover the cost of stripping and rebuilding that is a no go. They made the mistake, they have to provide you the bike that you paid for
Option 4: you return the bike for a full refund