How should I interpret the results of a lead paint test

Definitely read up on the EPA 'renovation repair and painting' rule.

Option #3, the 1/4" drywall, is likely to produce the best and cleanest results, at the cost of loss of room space and alteration in the look of all your trim. You'll have to extend all outlets also. Of course that sounds suspiciously like what happened last time. Eventually your room will be solid wall covering with no center.

Option #4 sounds attractive if that texture on the wallpaper will really hold the joint compound. I'd run a test with and without the primer/sealer. Remember worst case here it cracks later and you redo it all with #3.

Stop sanding immediately! Lead based dust is the worst threat of all. Simply painting over it to encapsulate it is the simplest measure.

To fully remove the lead paint is a big chore, and important to do right. Look for local community classes if you can - the local one here had some classes on lead certification. The short answer is, you have to seal the area off with plastic, wear a hazmat suit, scrape it all off and remove the paint from the premise, and then clean up all the dust.

You can google around and turn up tons of hits for lead removal procedures, here's the first I found and looks pretty good:

http://www.health.state.mn.us/divs/eh/lead/homes/interior.html

One tool I used in my own lead paint removal was http://www.speedheater.us/

While it is stated not to use heat guns to remove lead paint, this one is a much lower temperature version that is much safer. The fumes are still an issue so make sure there is ventilation to outside while working. (Not related to speed heater, just a happy customer)