That is option 4 yes, alas it only really is functional on a 60gb (with 50gb to OtherOS), but still works out fine.
For what its worth, you can also use this util to backup/explore ANY ROUND disk (cept HD-DVD's basically)
AND, it has a web server, access it at
http://Your PS3 IP (no spaces!, displayed on the program in the header), and you can browse the Blu-Ray disks, or your HDD (OtherOS side), and download files. Features UDF 2.5 support as well, so you can grab encrypted files from Blu-Ray movies, download them to your PC over a web-browser, and then decrypt!