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There are two issues that can affect #1.
Options as the OP indicated. If players have options but less than 5 years MLB service they can be assigned, no question. If a player has options but 5 years MLB service, they can refuse assignment. At that point you can do waivers and DFA. Only after that would you have to release them.
Perhaps the OP can confirm the actual sequence of events. BTW I've had to release a veteran or two over the years in the playoffs. It happens.
The other issues have been explained.
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RichW
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“Conservatism consists of exactly one proposition …There must be in-groups whom the law protects but does not bind, alongside out-groups whom the law binds but does not protect.” Frank Wilhoit
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