RA-since it looks like options 2 and 3 will cost about the same I would absolutely go with a pellet stove. I have one in my home and it has saved us a lot of money on heating bills and I can't imagine being without it (you can buy the pellets by the ton which is the best way to go)Why waste your hard earned money on paying more for oil when you can invest the money in something that you will have for a long time and will heat your home comfortably and economically?? In addition, I don't know what condition your furnace is in, but less use will be less taxing on your unit. It won't take you long to recoup your expenses if you buy the stove. I personally view this as a needed expense-shelter, food and warmth are on the top of my list.

rolling ridge,

With most pellet stoves, or stoves that burn wheat, rye or corn, the stove has a fan that pushes air through the fire.

This power draft means that one needs only a vent through any exterior wall.

Many such stoves have a basic exhaust pipe and intake pipe (to pull cold air in from outside - as that fan pushes a lot of cubic feet of air through that fire in an hour, and you don't want it sourcing heated room air) for a short run included with the unit.

Using pellets means that you are forced to buy from a supplier of pellets. In this area, one such plant burned down and they were unable to supply for some time. I don't know what alternative supplier was able to supply pellets.

If you live near farmers who grow wheat, rye or corn, you might want to consider a stove that is certified to burn one or all of those fuels.

Then you can obtain supply of fuel from any grower of that grain, you aren't limited to a certain or a few suppliers.

I sold such stoves about 15 years ago, and said at the time that I believed that such stoves would supply heat more cheaply that any other fuel except wood that you cut yourself.

Which requires a lot of specialized equipment ...

... and heats the producer of the wood about 8 times between cutting the standing tree (or cutting up the tops after logging) and throwing the block of wood into the fire, as cutting, stacking, hauling and storing fuel wood is heavy work.

I still figure that judgement to be valid.

Hope you find that equipment that best meets your needs.

ole joyful

My neighbor told me a few days ago that they had planned to put a pellet stove where their fireplace is currently and the city told them they would have to dismantle the chimney first which would mean tearing a two story section of their house. Can that be right? It seems like he must have misunderstood.

BTW - I also think heating systems are a capital expense and worth borrowing for.

I would definately check that out again - we are looking to put a pellet stove insert in our masonry fireplace and all we need to do is use the required 4" stainless steel pipe from the stove out. I certainly wouldn't be able to dismantle the fireplace. (But I guess it all depends on the city code)
And thanks for the other responses - I don't feel so bad about having to do it. Looking into credit union loan instead of cc