Y'know, there's a reason in publishing that rejection letters which contain actual comments on the book/story just rejected are so treasured -- it's because it takes time to write the comments and phrase them in a way that will be (hopefully) positive and constructive.

I didn't realize you'd opened up for submissions, but I think your two options are the best. Sounds like it's either that or stop accepting submissions. Of course, refusing to accept submissions probably wouldn't stop the people who whine and complain, so your two options are definitely the best.

Do what's best for you -- this isn't a business; it's a hobby and as such, it sound provide at least some enjoyment. It certainly shouldn't provide stomaches each time you turn on your computer.