So, South migrations will not work with Django 1.7. Period.
There is no way around this; it's unfortunate that the packaging situation means that Django will get auto-upgraded as part of a distribution upgrade; I'm surprised that Debian hasn't had this with packages before? (Version upgrades that break installed but non-packaged things)
Neither of your suggested ways to go forward will work; the two history models are very different, so the tagging of positions isn't going to work, and Django 1.7 has changed substantially enough internally that porting South 1.x up to it would be a very large amount of work.
How has Debian dealt with breaking changes like this in the past? Things like Rails upgrades come to mind. This change isn't as bad - nothing will actually _break_ when you upgrade, and apps will still run, but migrate will instead fall back to non-migration mode (which won't destroy any tables, but will fail to apply any table alterations).
Also, what are the applications in particular that this will be a problem for? I'm curious to know what Django + South things Debian is shipping these days.