I'm wondering if replacing my carbon filter did it. Can I bump up the GH with mineral rocks? And decrease ammonia with an ammonia toxifier? How come my Nite-Out II wasn't bringing nitrites and ammonia down with the water changes? I could just forego both the Stress Coat and the Nite-Out II and get Amquel.
It's possible that removing the carbon filter could have caused a change in the tanks parameters. Most people that I am aware of don't use carbon with shrimp.
I don't recommend mineral rocks... If you mean the mineral balls, they degrade very slowly and don't really add much benefit to the tank. If you mean mineral rocks that do degrade, these often degrade quickly and can shoot your GH, KH and TDS out the wazoo! Rocks like seiryu stones. You are better off using a GH remineralizer. You don't need one with KH, only GH.
Quick search on Nite-Out II, I see some people who love it, others who prefer Safe-Start.
No experience with Amquel either, but I'd recommend doing water changes over trying to treat a tank with ammonia, nitrites and nitrates... having plants that could eat up the excess nutrients could also help... duckweed, frogbit, red root floaters, salvinia natans.... (would kind of need to "overload" the tank with plants)
My thoughts here is that shrimp can be sensitive to water conditioners and it can result in stress. Accidentally OD'd on Seachem Prime (basically same as Amquel, little different than Stress Coat - I think?) with a water change (it went into the fresh water prior to going into the tank) and it caused the shrimp to swim about the tank and even a few tried climbing out of the water.
If you want to use the conditioner straight in the tank, then care needs to be used as too much will cause stress. So, rather than adding even more stuff to the tank that could result in stress, why not just do frequent but small water changes to get the current levels down? You want to do them at least every 3 days, if not a little more frequent, until things get stabilized.
If you can isolate the betta in the current tank, definitely try that! Shrimp though can sometimes find their way into places they shouldn't be.... such as breeding boxes, canister filters, HOB's... Case in point, I pulled 4 shrimp out of the HOB on my 20 gallon tank. I'm surprised I didn't kill them since the HOB was turned off and drained of water (massive water change caused the water in the HOB to drain out... tank is doomed...). I started a drip acclimation back into the tank, then remembered I saw a shrimp in the HOB, and it would probably be a good idea to drip the water back into the HOB to keep the bacteria alive. In case the shrimp was still alive, despite the HOB being drained of nearly all the water, I moved the drip to the HOB. Three days later, tank still isn't filled back up and I check the HOB and see 3 shrimp just sitting at the edge right where the water flows back into the tank! I look inside and there's 4 shrimp! I'm honestly not convinced that there isn't a 5th or 6th shrimp hiding in there somewhere!
As far as your choices... I would go with "B". Take the filter and give it a good squeeze or two into the new tank or into the new filter media, then place it back into your first tank.
I'm probably doing everything wrong. I filled the new 2.5 gallon tank with water, waited 30 min, put in some dechlorinator, then put in the dead body of the cherry shrimp earlier today and some mini-pellets. I just rinsed my established's tank inner sponge filter in the new tank's water until the water got really cloudy. I took the nasty old biomax bio rings from my old filter and put it in the new filter, in the bottom compartment. Then I transferred a few handfuls of gravel, some plants, a moss ball from the old tank to the new one. Am I on the right track? I'll check the ammonia levels tomorrow when I find my master test kit.
I would have put the dechlorinator in the water prior to adding it to the tank...
I would have also tossed the dead body...
I'd say everything else is good though.