Both of the options you list above result in the correct outcome. Either option adds the excess contribution to your wages on Line 1 of your Form 1040.
As far as the e-file loop you are stuck in, it was just announced that an update is currently planned for April 12th, 2019 to resolve this e-filing issue.
You may still see a warning about the excess contribution, but you should be able to e-file. You can check out this TurboTax FAQ for more information: Excess 401(k) Contribution Preventing E-filing.
