I think there are other ways besides Option 1 of integrating "evil" PCs into a standard campaign without tricky plot devices.
To start with the definition of an "evil" character:
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characters that place the motivations of selfishness and bettering of themselves (or their social/racial group) over the goals, happiness and lives of their fellow characters.
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Does the second occurence of "characters" refer to PCs or NPCs? If NPCs, than most kick-in-the-door style play invovles "evil" characters, as in this sort of play the PCs prioritise the party's interests (ie the intrests of their social group) over the interests of the NPCs they kill and loot - so let's assume it means PCs.
Limited in this way, the definition is still a bit unclear. Is a PC who doesn't put in for beer money evil? What about one who hogs all the magic items to him- or herself? These are ways of putting self-interest ahead of the goals of fellow PCs, and Option 1 won't resolve those sorts of issues. But a PC with that sort of personality is not fatal to the game in my experience,
unless the player also tends to that sort of behaviour. . .
What about a PC who prioritises the interests of her social group over those of fellow PCs? A fanatic fits that description, but fanatic PCs are completely fine, provided that nothing in the game forces them to choose between the competing sets of interests. The same is true for selfish PCs.
Once the two sets of interests come into conflict, interesting roleplaying opportunities emerge for all concerned. I have had PCs convert other PCs to their cause, in not on pain of death than still less than fully voluntarily. Again, this need not be fatal
provided that the player of the converted PC doesn't have to sacrifice too much of his or her own agenda in undertaking the conversion.
(In my own game where this happened, the "evil" PC was an up-and-coming underling to a ruthless wizard staging a coup in the kingdom; the converted PC reluctantly came over to that side, but this did not stop the player of that PC pursuing his own interests: running a campaign against slavery in the kingdom, and trying to establish himself as a magistrate in his home town. In fact, the promise of a magistracy was one of the inducements offered by the "evil" PC.)
I think the real problem with "evil" characters arises in systems which try and implement a metaphysical alignment system, so that "evil" is no longer a debatable question of individual motivation, social context, the accumulated consequences of moral trade-offs, etc, but rather is an objective spiritual status. The problems with this sort of system are only increased when the behaviour associated with such "evil" status is taken to be not petty selfishness or minor wrongdoing but the sort of psychopathic outlook often attributed to Orcs, Goblins, etc - a worldview which I find it very hard to imagine any sane person cultivating, and which is not at all captured by the definition of "evil characters" given above.