I prefer to think that it is somewhere between options one and two, that is, mostly true, but containing some errors that resulted in the loss of many plain and precious truths.
This is the next layer of the onion. If we got his route (as you suggest above) it means that the Bible is more less without meaning except that which is applied externally. It means people today just pick whatever individuals parts they like, interpretations they already agree with, and make the divine word fit them rather than the other way around. No matter how we try to dance around the subject, the Bible is either:
3. A tool through which external meaning is applied not unlike a deck of Tarot cards.
I believe I have an answer for this problem, but it would involve delving into the purely theological. I would need to lay out, at least in part, my own religious views regarding the nature of scripture and the process whereby revelation comes. I'm not adverse to doing so, but I'm a little hesitant to derail the thread so far by turning this into a thread to promote my own religious beliefs.
Let's linger on that third option. If, as you suggest, the book can be infallible because the meanings and rules change but only when divinely inspired, the Bible is being transformed into Ouija Board wherein a select few (the loudest or most theatrical) get to decide what means what. In such a situation, how exactly is a normal person to tell the divine truth from a charlatan? The Bible becomes like statistics wherein anyone can prove nearly anything they want.
But from a purely academic or logical standpoint, your statement is true. There is no way to empirically prove what is from God and what is not.
Good point, though I don't think that altering your religious views according to your own increased learning of the natural world means that an error is present.
The funny thing about #3 is that is solves all the logical problems for people claiming #1. If you believe the Bible is infallible, and you can make it thus simply by interpreting it however makes it true, you have accomplished a self-fulfilling prophecy. We see this discussion come up very often when people discuss Genesis. How many days did it take God to everything? It is measured in days. Is this literal? Some would argue yes. But those seeking to reconcile science with theology counter with, "ah but what does a day mean to God?" They can interpret the statement in a way that still can be supported with just a little bit of legwork.