Quick follow-up....thanks to everyone's thoughts and feedback.
Despite the fact that we could have probably pulled another 1-3 years out of the existing clunker we decided to go ahead with option (c) and make the purchase. In the long term it's not that big of a difference compared to all the other savings we do and it seems like the right balance. The remaining 10 year old car will now have to last to at least another 4 years so we can keep our payments to one vehicle.
On a related note, I did find it harder to negotiate with various dealers than I thought it would be...inventories here are much drier than they were and several dealers were just starting to pull out of CFC. We still got the average of what other are paying according to Edmunds ($1700 under MSRP), though, and the gas savings each year should be great.
Now time to shop for an auto loan. Will see if we can beat PenFed's 3.99%. Fun fun....