I agree with option 3, used equipment. Rental equipment is almost universally poor fitting, the boots are either extremely loose or extremely painful.. or both! Neither of those situations leads to effective skiing or an enjoyable day. Hit up ski swaps, consignment gear shops, that kind of thing, and get your kids some decent used gear.
A reputable ski shop with a used section, or a well established ski swap is best, and then to be safe always go and have the equipment checked at a good shop. Bindings do have an "expiration date" so to speak, at least a date after which shops won't work on them anymore. Boots also can get worn down and unsafe. So always check after you buy.