It should be noted that Mr Buffett has said that the even if T-bill yields were low it would not change the fact that he'd be holding so many of them them. i.e., the currently high yields on T-bills are not a factor determining how many Berkshire holds, they just make the chosen situation more pleasant. So a fourth option would be "keep holding T-bills even at low rates until some better opportunity comes up".

I suspect that Buffett was mostly referring to the "base" $50-100B that he wants to keep in cash at all times. That cash will stay in short-term T-bills at any interest rate. The purpose, as stated many times, is such that Berkshire can weather any grave emergency (massive insurance claims, some other calamity, etc). I don't think he was specifically referring to the additional $200-300B of cash that mostly comes from realized gains and is to be reinvested someday.

Furthermore, I think that when the S&P500 earnings yield becomes higher than T-bill rates (enough higher to make a difference), that is indeed the "better opportunity". I think Buffett usually compares the 10 year treasury rate to company earnings yields, but a similar principle could easily apply to T-bills.