According to EU261, that's pretty much what they can do for such changes. Imho there should be a fare difference paid, but assuming you booked a deep discounted Y+ ticket, the fare difference to full fare Y is effectively negative.

If you want to fly premium economy (a free upgrade to Business is NOT happening) for the price you paid, then check other transatlantic routes that might have them, ideally with LH Group (Lufthansa or Swiss are your best shots) and ask to be rebooked onto such a connection.

So yes, 3c) is the way to go, but be open for another routing if "EWR" doesn't have any availability.