Option 1 sounds the best, and I'm hoping you can't actually see the carpet in the bedrooms from the stairway. What color is the bedroom carpeting? If it's a nice neutral, you could try to find something similar for the stairs. Another suggestion would be to check the pricing on the stairway wood with other companies.

I would prefer stairs and hall to be the same. If your bedrooms are used by children who have an opinion about it, you could do different carpet there. Otherwise, keep it the same in stairs/hall/bedrooms for continuity. Going from carpeted stairs, to wood hall, to carpeted bedrooms would feel too choppy to me unless you have an unusually large hall.

Giving children a say in what carpet color goes in their rooms seems dangerous to me. Carpet is not something that can be replaced every 3 or 5 years...maybe just every 10 years, and a carpet color chosen by a 5 or 8 year old surely would not be the color they'd be happy with for 10 years. I suggest one neutral color for all the upstairs bedrooms.

Wood on stairs and in hallway and carpet to go with decor in each bedroom

Hardwood on stairs looks much nicer than carpet and it's easier to maintain. I would put hardwood on entire second floor including bedrooms but if you like the look and softness of the carpets try to keep the same neutral colour in every room.