The first scenario seems to me less likely because it would imply the female did not have room to maintain the fry in her buccal cavity any longer and began to release them despite her desire to keep them safe. However, the two fry that ultimately survived were not terribly large. I would say they were right about the standard size for fully developed fry of this species. I base this observation on comparison to previous batches of demasoni fry. In a safer environment with plenty of hiding places for the fry and fewer predators, I imagine the female would have released the fry nearly a week earlier.
So, is there merit to the concept that fish will sacrifice (instinctively, not through reasoning) some of their offspring to ensure the survival of others? I've heard that some South & Central American cichlids will consume their eggs or fry if they are likely to be killed by other means. This maintains the protein levels within the adults to produce another batch of fry at a time when environmental factors are more favorable to their survival. I don't know the answer, but I find the concept worthy of interest.