non-fixie spot on como normale.
+1.
vote for your option number one. have straightened a number of these and it certainly looks feasible.
also a visit to a local bike co-op/charity might produce a suitable arm at a low cost.
it is probably unlikely; but an impact strong enough to do this may have put the frame out of alignment so I would check that also just to rule it out.
best o' luck with this.