You could agree or disagree with Holmes, but he appears to be well respected in D.C. policy and defense circles. My problem with his "option 3" is what do USN/USCG ships do after they get there? Have a party? Read them the Riot Act? WHAT?
Imagine USCG vessels among scores of CCG ships and 'fishing' boats, and they bump/ram each other. What then? Would USCG ships open fire on CCG ships without being fired on? Will American sailors machine gun Chinese 'fishermen' for bumping into or ramming them? What happens when Burks and Luyangs circle each other with unclear intentions? Accidents happen and things could spin out of control in a hurry.
By rushing into action without thinking things through, the dragon slayers risk a Sino-American crisis that might inadvertently lead to open hostility and even war. Scary thing is both Washington and Beijing are full of 'get-tough-with-them' war hawks.
Under what legitimacy would the USN/USCG "police" these waters? Freedom of navigation? As far as I know, no commercial shipping has been denied passage despite the clashes out there so far. Despite rhetoric, no threat to freedom of navigation nor would there logically be as each nation in E and SE Asia benefits from trade and would not want to hurt themselves.
Anti-piracy? There has been a flare up of piracy but in waters off Indonesia, Malaysia, and Singapore so those are the nations that would have to allow USN/USCG to "police" those waters but they are mostly outside of the main areas of EEZ/sovereignty contentions between the Philippines, Vietnam, and China.
So that would leave either Vietnam or more likely, the Philippines, to allow "policing" by the USN/USCG. But this is a heavily gray zone that will not help the US's credibility nor claim of neutrality. As much as both VN and PH criticize China, both are equally stubborn in feeling self entitled to 200 nm drawn straight from their coastlines as their EEZs when the reality is there's a whole lot of nuances that would overlap and compromise a clear cut 200 nm. Examples are
-Taiwan and Batanes, Philippine EEZ claims from Batanes literally give Taiwan the short end of the stick which is absurd. A good counter example is Saint Pierre and Miquelon which does not give France a full 200 nm around the island. Infact, the island's EEZ is fully within Canada's EEZ.
- Vietnam's 1958 diplomatic note acknowledging Chinese sovereignty over Paracels and actual decades of Chinese effective control.
- Taiping Island being the only natural island with natural freshwater sources that clearly qualifies for its own EEZ under UNCLOS Regime of Islands. Drawing a 200 nm circle around Taiping will overlap a lot of other EEZs so compromises and demarcations are needed.
With the US not even being a signatory to UNCLOS, how does the USN/USCG righteously "police" these waters which have sovereignty disputes? It would be a quagmire and not something black and white that Holmes points out which is US soldiers on indisputable NATO territory.
As much as all the fear mongering about an impending Chinese invasion, the reality is China has no incentive to invade any mainland proper of the Philippines nor Japan which is already covered by US defense treaties. This option 3 proposal is just adding more self-inflicted problems for the US as if Ukraine, Libya, Egypt, Syria, Iraq, and Afghanistan aren't enough already.