Why not do option 2??

You get the 2900, do the repairs for less than that and spend the remaining money on more upgrades.

Who cares about the title?? You should keep the car for a long time to come if it runs as flawlessly as you say, and as long as you have the whole story explaining the salvage title you should still be able to sell it for decent money down the line.

Sorry to hear about your predicament and I hope it works out for the best.