The 4th option would be to just not assign a moral value to their comments, and chose for yourself as an individual to not let yourself be offended by them. It doesn't mean the co-workers were right, but it doesn't penalize them if the didn't intend to be bad (because doing so would be a slippery slope to thought policing). Unless OP thinks his/her co-workers would face Pao in person and tell her those things, or worse, act on them, then is there any reason to let their silly actions cause you any distress?

OP did not say he was offended, just disgusted. Like "haha gross, look at these shitty guys". Just like if someone starts making racist remarks, even if I don't personally believe they would murder a black person in the street, I will feel embarrassed for associating with them, and recognize that they are shitty people at the moment, and that is not a slippery slope to thought policing. That is how culture slowly fixes itself.

I don't know, where I'm from "disgusted" is a much stronger term than "offended". It's like a visceral repulsion that triggers something bordering on mild rage. I don't know how the OP intended it, but if it's as you describe, then yes, it's not too bad, but I haven't seen that term used so lightly usually.

To me disgusted and offended are unrelated. I'd personally agree that in magnitude of responses, disgusted is probably stronger, but, to me, being disgusted is about finding something to be awful, whereas being offended is like being hurt yourself. As a white guy, I am not offended if a racist guy talks about killing black people. I am disgusted, and hush the room and tell everyone to point and laugh at him.

So here's something that's always struck me as odd about these sorts of defenses of free speech. (This is something I've been thinking about for a bit, so I'm not picking on you specifically, you just reminded me of it.)

I believe in the power of speech. I believe that there is utility in being able to convey my thoughts, without someone else filtering or censoring them, to others. I believe that my words mean things, that they reflect what I believe. I believe that being a person "of your word" is an important thing: that when you say you will do something, you intend to do it. I believe that lies are, of themselves, clearly of negative moral value. (Which is not to express an opinion on whether lies can serve some greater moral good, just to say that they have inherent demerit.) I believe that if I care about my friends, I care about what they say; if I value my friends, I value what they say; if I respect my friends, I respect what they say.

It is out of that conviction that I think that restrictions on one's ability to speak, whether from a government or a private party, carry great power, which, like all power, can be abused.

If I don't assign a moral value to these coworkers' comments, if I don't care what they say, if I don't care to have opinions on their speech lest I risk "thought policing" them, if I believe that people may say bad things while intending to be good (or vice versa) and that's just okay... it seems that I have completely devalued the power of speech, and I have destroyed the very reason we care about free speech, without censoring a single word. If anyone can say anything and it could mean anything or nothing, and nobody cares, what is the point of speech?

The point of drunk, hyperbolic speech is to vent frustration. Just because some kinds of speech can raise armies doesn't mean that all kinds of speech should be treated as if they will.