|P is for Practical|
I think the original proposal stigmatizes downvoting too much.
The intent is not to stigmatize down-voting. The intent is to encourage empathy, but not total empathy just because that would cause way too much complaining. The vast majority of monks can still cast a down-vote without any fear of losing even 1 XP for it.
don't want to stifle inclinations for genuine criticism
I guess you mean "genuine criticism" in the sense of the intro line from the old series The Critic: "It Stinks!". I think that intro line was meant to be ironic. Calling a down-vote "genuine criticism" sounds quite ironic to me as well. I think a much more accurate term is "anonymous sniping". Now, contrary to some who would resort to reductio ad absurdum, that doesn't mean that I think we should just get rid of down-voting. As anonymous sniping goes, down-voting is of a superior variety. On the internet, anonymous sniping is inevitable but most of it contains far too many words. It is hoped that down-voting as anonymous sniping provides a valuable outlet for negative feelings, one that most of us don't have to witness1. As an aside, note that down-voting works best when at least one of the critics at least occassionally finds the eloquence to cast the cricism in the form of words (and not as flames).
1 But the sniping can still be satisfying because there is at least a chance that an impact will be noticed on the node's reputation and maybe even on the author's XP. And the sniping may even ultimately be constructive in causing a small doubt or concern to appear in the author's mind that eventually comes out as an improvement in some behavior (the connection is quite tenuous but the hope can still exist that the aggregate impact may be positive).
Down-voting also has a small role to play in node reputation. But node reputation is all about the number of monks motivated to vote not how motivated nor how often motivated, so since there is no dis-incentive against individual down-votes, it will still serve that purpose quite well.
Some are predicting the loss of the down-vote as "monk discouragement". Yes, I've certainly made it less useful for that particular purpose. But I don't think it worked very well for that purpose when used as one monk systematically downvoting all or most of the nodes of some other monk. So I don't mourn that particular loss. And I think it is still a powerful option if used as "a whole lot of monks take a dislike to many of the recent nodes of one monk and a lot of down-voting, in aggregate, results". So it can still be a powerful tool for "monk discouragement" but only when there is some small bit of concensus in the matter and the discouragement is based on recent postings not past sins. And I think both of those restrictions on its usefulness are good things, actually.
The change is that casting a lot of down-votes will soon require a bit of "forced empathy".
In most cases, "casting a lot of down-votes" has a whole lot more to do with the person casting the votes than with the nodes being voted on. So that type of "criticism" doesn't qualify as "genuine", IMHO. In rare cases, one may find a genuine urge to provide a lot of "criticism" without the motivation to actually form words. I completely understand that urge. And giving in to that urge is certainly better than resorting to flaming. And I bet that people will continue to give in to that urge more than rarely in the aggregate. I hope the main impact of this particular rule change will be that those people will more quickly get over the urge. That's part of the point of allowing down-voting: getting over the urge to continue sniping.
The idea of your option (1) doesn't bother me. I'll certainly comtemplate/discuss that some more before throwing the big switch to finish enabling the feature. But I think having a less than a 1.5% chance of losing 1 XP after casting the 8th down-vote in-a-row is quite a small amount of empathy and it doesn't seem even close to "too much". It climbs to a mere 10% chance of losing 1 XP after the 10th consecutive down-vote. If that looms large to you, then I suspect that is more fear of the unknown magnifying the prospect and you'd find it not nearly as disturbing as you expected once you started living in that new world.
I don't like your option (2). A little uncertainty near the zero point builds character.