This story is simply amazing. You have created such complex emotions and characters--making them more real in fanfic than they ever were in canon.
First, I have to say that I adore your Lily. She's not the perfect, shining example of virtue that she's made out to be. She's petty and cruel at times, and like most children she judges the worth of others by her peers. Her inability to see Severus's love is understandable, as is her jealousy. She's rightfully mourning what she loss, what she took for granted because there was no challenge.
At times it seems as if she's Harry's peer and not his mother, which makes sense since she was only alive when he was a child. I love this Lily so more than I ever liked the canon one.
Severus is the perfect tragic hero. Brought down by his own and outside forces, he's too jaded to hope for something better. The scenes with him and Harry in the second option were wonderful and just how I could imagine a relationship between them: snarky banter and passionate love.
I was enthralled from the moment I started reading. Most excellent work.