I'm for option #2: Not only does Diamond dog get everything he wants that way, but in a sense Bloom also gets everything he wants, which is to get out of the conning cycle (unwritten life) and a girl who loves him for what he is, not just his con-persona.
As for Stephen, I think it becomes pretty clear that he loves his brother so much that all he wants is for Bloom to be able to be happy. And Stephen probably has realized that it's never going to happen if he's around bringing Bloom into new cons. So the only way for Bloom to be able to be happy is if Stephen is not around anymore and thus Bloom is set free. So even though Bloom surely grieves for his brother, he's still free to live a happy life otherwise. So in the end, Stephen also gets what he wanted even if it ended up costing him his life.
And Penelope got her life back and can now enjoy the World with Bloom instead of being a prisoner of her fancy home.
So thus one can say that everyone got what they wanted (one way or another). "The perfect con is one where everyone involved gets just what they wanted."
Also, Stephen tells Bloom "the day I con you is the day I die", which is exactly what happened, suggesting that his demise was already in the plan at an early stage. So I would go as far as saying: Stephen's intention was never at any point to get any money from Penelope. Stephen's only goal was to give Bloom the unwritten life he wanted with Penelope. I support this also with the fact that Stephen had promised they'd never con a woman. If he held his word (which I think he did), that means Penelope never was the mark, Bloom was. (Again: "The day I con you is the day I die").
And I don't think this option rules out the "told a story so well that it became real" either. There is nothing fake in Bloom's and Penelope's relationship or in the fact that Stephen had to die and that Stephen's, Bloom's and Penelope's lives were forever changed for real.
So to recap: Everyone got what they wanted + Stephen told the story so well it became real = The perfect con x2.
It has been awhile since the last time I watched it, so I might have forgotten some details but that's the way it struck me.
Brickster is the only criminal on Lego Island!
He created the Brickster-Bots, robotic criminals. Their weaknesses are pizza and music. Throw pizzas and hit them on the head to kill them.