In reverse order:
3 is no good. Tremendous amount of brand new construction required and the article thinks it might take 10 to 15 years, so multiply by three, even if they do still have all the original GWR surveys etc (if I understand the article correctly).
It's all going to be new construction anyway.
Just because a railway was notionally there 60 years ago does not mean it is going to be easier to build than on a new alignment.
And the surveys from the construction of the Okehampton route will definitely all be gone since they were done in the 19th Century.
I'd trust the quality of 1930s surveying work over 1870s surveying work any day of the week, but that is admittedly just me!
It's also a route which plainly (at least so I would hope) isn't suitable as a Dawlish replacement. So it minimises the temptation to do something horrible like not repairing the sea wall and just having a couple of withering stub-end branches to Dawlish Warren and Teignmouth.
If it can't reduce the costs on the existing route then its business case consists of "give us a pile of money to build this line, then provide a pile of additional money each year in perpetuity to run trains on it, whilst you continue to spend the same amount of money you do now on the main route".
I'm not really convinced that that is going to be a particularly attractive business case to the Treasury.
A Dawlish bypass goes where the passenger flows are and provides significant benefits every day, whether or not the existing route is untenable or not.
If you squint you can make a case for a train to Tavistock, maybe. But a line from Bere Alston to Tavistock, a total line modernisation between Plymouth and Bere Alston and a major upgrade between Okehampton and Exeter has no chance. Especially if you are trying to justify it on the basis of local traffic and a few days a decade of diversion. It's 30+km of brand new alignment just between Bere Alston and Tavistock - compared to about ~15km minimum to bypass Dawlish.
EDIT:
Worth noting that by the time a train from Tiverton Parkway to the west has managed to divert (reversing twice) and leave Plymouth, a coach on the A30 (now essentially all dual carriageway) would likely be a loong way ahead of it, even allowing ofr changing. I can't see it being an attractive option for diversions, its just too slow.
AIUI there is very little obstruction on the route and the main problem is getting someone to realise that you can repair Meldon viaduct using the same techniques that the original builders would have used to be compatible with it being listed.
The technques the original builders would have used is probably to tear it down and build a new viaduct....
The line is unobstructed because it runs through one of the closest things you can find to a wilderness in the south of Britain. There is noone around to use the line, so its not going to generate large amounts of traffic to defray the cost of operating it, much less building it.