Sure David, but your reasons for choosing "option 1" are thematic and not textual. Thus you seem to be overemphasizing one theme of Romans at the expense of another. I agree with everything you are saying, because what you are presenting is obviously a key theme of the book of Romans. But it's not the only theme; neither does that theme mitigate against the argument Paul is making in Romans 11 for a future mass conversion of individuals from one nation. That God happened to promise that very thing in the Old Testament only adds more forcefulness to Paul's argument; that Paul quotes one of the prophets that predicted that future event (Isaiah) also adds weight to the point that it will happen.
As we've agreed upon many times before, there is no difference between Jew and Gentile as it relates to salvation. But as Paul himself notes in Romans 9:4, there is a difference between Jew and Gentile that cannot be overlooked: God made promises to Jews that He did not make to Gentiles. Our friend Fenris has made that point on these forums many times. Why? Because, rhetorically, it's a point that must be addressed as it relates to the New Covenant and the manner in which its fulfillment seems on its face to be fundamentally different than what, say, Isaiah prophesied. Paul's ultimate point in Romans 9-11 - that culminates with the verse you highlighted (11:27) - is that no, God has not:
(1) Rejected His people. Paul himself is the proof that God has not rejected those whom He foreknew - which is a critical word indicating that God knew in advance that Israel would, for the most part (outside of the faithful remnant), reject their Messiah and "stumble" at their key moment in history. Paul brings up the argument in Romans 9-10 and now is addressing its implications, practically, here in Ch. 11.
(2) Allowed them to fall even though they have stumbled. Paul goes on here to make an astonishing argument - one I don't know that we fully appreciate. Paul's point here is that - because the root is holy - even the broken off branches (those that stumbled) are holy! That's an outrageous statement. Yet he warns Gentiles about being arrogant towards the broken off branches! Why? One reason is because humility recognizes that the rejection of the Jews was, in part, a God-ordained mechanism to bring forth His plan for the Gentiles. It's a God ordained "spirit of stupor" that Paul argued in Romans 9 He was well within His rights to do as the Potter. He can make the promises, cause the context of partial blindness so that the people will miss their fulfillment, yet have that rejection become the means for salvation to come to the Gentiles! Yet that feeds into the third point; God has not:
(3) Blinded the Jews fully and forever. Blindness has come "in part" and "until". There is a future time, Paul says, in which the partial blindness related to God's plan will be lifted. This is knit to "the fullness of the Gentiles" (distinction) - and in this way those who had been blinded will then see. Then, individually and in large numbers, they will get saved. Then, the stunning nature and details of the mysterious plan of God will be revealed to all, which causes Paul to exult in Him in 11:33-36.
Why is Paul praising God in those verses? Because of the mystery of God's plan - that it might look one way in his generation (God has rejected His people, the Israelites have stumbled and fallen, Israel has missed her divine moment) but in the future, God's wisdom will be fully vindicated. The Gospel will be preached to the Jew first, and then the Gentiles; but the "fullness" will actually "flip the script", as it were - Gentile first, then the Jews - leading to riches and glory for the whole earth. All of the prophecies of, say, Isaiah, will be fulfilled as they are written (meaning, it will "look like" what Paul's audience was expecting related to those promises - not "wooden literalism") - but their fulfillment will come in context to a glorious picture of harmony between two peoples that leads to harmony between two "realms" (the "mystery" as it relates to Ephesians 1-2, specifically Ephesians 1:9-10).




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Secondly, it doesn't have to be "either / or" it can be "both / and". You haven't really explained why it can't be "both / and" - mostly you've asserted that it won't be, which makes little sense. 
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