The third option is the correct one - "it tells a moral tale that is at odds with the pardoner's own persona". The pardoner is a con, and he admits it. He tricks people into giving him money, and that is how he earns for a living. However, his story is quite the opposite - it is a moral tale that should teach us how to behave and what not to do, and his preaching and methods, despite how corrupt they are, are ultimately good.
