Option #3 (quit and work on projects) also seems to come with a salary cut (down to 0). If working for a startup would drastically cut your family's standard of living, so would this option.

Startups have other problems besides the lower salaries you were offered: the vast majority of all startups fail quickly, so there's no job security. If you take one of these jobs, you might be looking for a new job in a few months.

I'd suggest staying at your current job and continuing to look for another one, but not at a startup.

Also, you say that your current company isn't working out for you. Is it really the company, or just the job you have there? Would it be possible to change jobs within your current company?