I've seen Elementary fans evenly split between whether it's a hallucination and whether Irene is real. Your point a and b make sense, as my theory that it was a hallucination made sense to me at the time (but now I'm wavering between whether it's a hallucination nor not...I guess we'll find out on Thursday.)

I hadn't liked Irene getting killed off before we'd ever met her (or Sherlock believing Moriarty had killed her) so I do sincerely hope she is alive because that is a tired old trope.