(Posting in this thread because it seems to have the most constructive feedback overall)
Option 2 has worked out great with abge, but it's hard to keep that kind of well balanced, careful moderation going over a long period. If you want confirmation talk to all the guys who put huge effort into careful game moderation.
It'd be easy to do option 2 and say "okay, now we ban whoever we think crosses the line", but then lots of gray area cases are banned and pretty quickly the forum dies out. (I've seen this happen quickly, and to larger forums than this)
It's hard to say option 2, but only for this one guy right now. We'll be right back here in 2 weeks with someone else or after a few weeks and a long tortured process.
I understand why people might not want to mute a person, where they're part of a discussion that you can't see, and I think we can do more in software to help create more of a communal mute.
Some ideas have been posted and are being discussed about how we could do that, and slashdot/reddit/etc show you can make self-moderation work, so thanks to those making tailored suggestions.
However I really don't see why anyone would read or participate in a thread that offends them, especially with the mute thread feature. And I don't like the attitude that "people *should* be muting that thread, but they aren't, so we need to do it for them." I think people can decide that for themselves (unless it's something that's a game-related issue or a handful of other specific cases).
As always when people step down we're looking at whether the team needs to be reshuffled, and I'm taking on all points of view that are posted, and either of those might mean we try a different approach or put the forum in someone's care and see how it goes, but that's my POV at the moment and I'm interested in any comments people have.
(As an aside it is true that I get many more e-mails about over-moderation, though not exclusively or recently and usually in short bursts over some drama)