I like the 2nd option a lot, mainly because of changing battlefields. As it is now, there's usually one spot that has clear tactical advantages over the rest of the map, and i don't move away from it much further than 8-10 steps untill i die.
The phases would give the player a bit of breathing room each time though, this will break up the tension in the game. I'm not sure how big an impact that is however.
I'm not sure if levelups are really necessary for this game to work, looks to me to be a lot to tweak and it's day 5 allready :).
But if you keep leveling up as simple as adding a bit of health that should be easy enough.
I like the ideas behind the 3rd option, but i doubt you can get it done so fast. And the hopeless feeling you have now would indeed be gone if you know you can actually win :D
Quoting: Glowie
don't underestimate the "just one more game, I'm sure I can slaughter a few more monsters!".
Listen to that man btw. It is indeed what i think after every game so far :)