For me personally, I believe the first interpretation is the correct one. HOWEVER, like most of the time when he puts his foot in his mouth, it ultimately doesn't matter in terms of policy. When he says something whacked out or cringeworthy, it won't get enacted into law anyway, so why care? What he does is ultimately far more important than what he says In terms of a positive lasting legacy.
But the problem is that not all voters are as policy oriented as are most of us. To those swing voters, what a politician says, even if they are words that won't ever be translated into law, really matter. I know an increasing number of people who simply can't get past the statements they find offensive or problematic. They've made up their minds at this point, and simply will not vote for him in 2024, period.
That may be irrational, or against their own interests, but that is ultimately irrelevant because their vote counts the same regardless of whether we agree with their reasoning.
So I agree with you. He just can't win in 2024. So if we want to win, we're going to need to nominate someone else.
Personally, I don't suspect we will win with any nominee, from 2024 onwards.