The one you have marked as three is definitely one of your choices. They are possessed by laughter, but the counterbalance to that is the Sergeant-Major's horrified look in response. He cannot believe they are treating this so lightly. It is a serious business to him, and we will eventually find out that the family's response will get them into deep trouble.
My other choice would be sentence two. The wife is very lightly making a joke which the husband can really appreciate. She's not taking the problem seriously at all. She is making an illusion to the Indian Goddess (Lakshmi and who is the goddess of wealth and prosperity) who does have 2 pairs of hands. Mrs. White is asking that she have 2 extra pairs of arms to do her work; she is making light of the Indian culture that would hold Lakshmi in high regard. The Sergeant Major is not taken in by any of this. He knows their a deep mysteries on our planet and he's urging them to take these mysteries seriously.
