Clearly there's a lot of depth here to exolore and I can admit to only a casual interest in the topic, but my understanding is that there were different factions within the Japanese leadership who were comfortable with different sets of conditions, and only #1 was a sticking point for everyone.
However, let's assume this is the only deal Japanese leaders would have accepted. Our discomfort about these conditions should be weighed against the discomfort of killing hundreds of thousands of civilians in bombing raids and dropping nuclear bombs on two cities. It's kind of hard to argue, for example, that an overriding concern about war crimes is why you'd have to bomb civilians.
1937 Yet another incident reignites the war, leading to the capture of Shanghai (https://en.wikipedia.org/wiki/Battle_of_Shanghai), the capture of Beijing, and the capture of Nanjing (https://en.wikipedia.org/wiki/Nanjing_Massacre): ("Because of the myriad of factors, death toll estimates vary from 40,000 to over 300,000, with rape cases ranging from 20,000 to over 80,000 cases. However, the most sophisticated and credible scholars in Japan, which include a large number of authoritative academics, support the validity of the International Military Tribunal for the Far East and its findings, which estimate at least 200,000 casualties and at least 20,000 cases of rape.").
"Some historical estimates of the number of deaths which resulted from Japanese war crimes range from 3 to 14 million through massacre, human experimentation, starvation, and forced labor that was either directly perpetrated or condoned by the Japanese military and government." (https://en.wikipedia.org/wiki/Japanese_war_crimes)
Now, I realize you've said you acknowledge Japan's war crimes, and you might even invoke the sunk cost fallacy: those people were already dead. However, there are two points you seem to be missing: the goal of the allies with their "unconditional surrender" terms were the removal of governments that had repeatedly demonstrated that they were militarily aggressive and their replacement with governments that were not (successfully, I might add), and by the scale of Japan's own actions in the war that "discomfort" is a drop in the bucket.
> "Our discomfort about these conditions should be weighed against the discomfort of killing hundreds of thousands of civilians in bombing raids and dropping nuclear bombs on two cities."
Think about the implications of what #1 is and what you're saying. The European theater equivalent would have been to leave Nazi Germany's government intact with Hitler as its head. If that's an acceptable deal to you, well, you're probably not going to find a lot of people to stand with you.
However, let's assume this is the only deal Japanese leaders would have accepted. Our discomfort about these conditions should be weighed against the discomfort of killing hundreds of thousands of civilians in bombing raids and dropping nuclear bombs on two cities. It's kind of hard to argue, for example, that an overriding concern about war crimes is why you'd have to bomb civilians.