My hundredth post!!
Congrat!
I feel like a voice in the wilderness, but I would go for number 2 - carry on the fight and open negociations. As for terms and conditions, this is difficult. You want Germany to disband most of its military machine, but they will still be fighting the Soviets. You want a free Poland, but how can that be if the war continues in the east? It all boils down to can there be peace while the war in the east continues? So maybe, start with unconditional surrender!
Another option would have been a European peace, including the SU.Like Kraxis said, the fundament would be prewar Europe with some new states in the middle. This would maybe closer to the balance that putting Germany down. However, the future of the states between Moscow and Berlin is still uncertain.
One thought that has crossed my mind is that perhaps the Germans best option is to make peace with the Russians and ignore the UK and the USA. Some division of the spoils of Easten Europe would be possible and Stalin, as an absolute dictator, is in a far better position to do this than say the UK and the USA. German war aims were driven by land not a crusade against Communism and now Hitler has gone, why not. The Germans could play the " they never fought by you and were prepared to let you do all the major fighting" card while the Russians could offer a "you have the West, we will have the East approach". Now - there is a thought.
I guess Manstein has the same idea. Although German military does not like communism and although there were so much murders and crime in Russia - this is one option if the Western democracies will not cooperate.
Manstein must know that militarily he has 2 long term options - a defensive posture to keep them at bay or some form of total defeat of the Russians by a furthur invasion. In reality, are either of these an answer? Nobody has ever managed to totally subdue the Russians going back to the Mongols and a defensive posture commits the Germans to years of fighting. Even with tactit support from the UK and the USA, does Germany have the resources to do this? Would the result be an exhausted Germany, ripe for exploitation by the UK and USA who had been waiting on the sidelines?
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