Can I vote #2? She wouldn't be the first mother to kill her kids because they got in the way of a new relationship where the guy didn't want the baggage of the kids. Think Susan Smith and Diane Downs. Then again they also aren't the first couple to think up killing off their spouses to be free to be with each other, and (IIRC the Mormon religion frowns on divorce). There's also the financial gain from all these killings- Lori wasn't aware that Charles changed the beneficiary on the Life Insurance. And they cover it all up using excuses to justify the murders/disappearances (Charles was abusive, JJ was acting up, Tylee went off to college, Tammy died a natural death, as did Joe Ryan and Alex), and all were "zombies/dark spirits" that deserved it according to their beliefs.
Chad might have been the one to murder the kids, or help Alex do it. Alex was definitely planned to be the fall guy/trigger man. One more thought about this- when Lori told the police in Hawaii that the kids were "safe", I think that there's a kernel of truth in her belief/statement in that once the kids were dead (she knew), they were safely buried in the backyard and couldn't be hurt anymore. Also, she asked her friend Melanie to lie for her that JJ was with her, so she knew that the kids weren't stashed with anybody.
I think that they stored the toys to buy time, didn't think about the surveillance cameras at the storage rental place.