50% index funds, 30% hookers, 20% blow.
Failing that, if you're not maximizing your tax-advantaged space, and you're in a high enough tax bracket that you will no longer qualify for a Roth IRA next year, then I suggest your option 1. Take it now, you never get it back.
529 accounts are fine after you've maxed your other tax-advantaged space, but I personally see little advantage in giving myself future withdrawal restrictions. If you want to pay for you kids' college, you can do that from your Roth, or your taxable accounts, by paying off their student loans when they graduate, or any of a thousand other ways. The 529 is a solution in search of a problem, IMO. I still have one, it's just a low priority for us.
Clearing the car loan is also a fine option, if you're the sort of person to value the psychological thrill of clearing a debt over the statistically more profitable option of investing your money.
PMI sucks, but 5k towards 40k isn't going to make a lick of difference. I'd only consider clearing PMI when you have enough cash on hand to do the whole thing at once, because then you get to keep that cash on hand and available for emergencies in the meantime, instead of losing access to it by putting it towards a mortgage for no material benefit other than an adjustment in an account ledger somewhere.