@ Carpeperdiem,
We used Sweettooth Rewards for almost 2 years with Magento, before switching to X-Cart last year. It is an amazing piece of software that should help compliment any store.
However, after the company went through its Series Round of funding, their prices increased .. to the point of where it nearly tripled in the course of 18 months.. For us, we see the value, but that value does not translate to spending $650 a month on a loyalty program.
For X-Cart, we decided to go close to completely custom development to outfit our store the way we want.
We are using the reward module we mentioned as a base, and add more features to our platform to handle our customer needs.
Similar to your #2 example, this is how our reward system works currently .. accumulated points can be sent within the cart or at checkout without the customer having to run around figuring out where to redeem. Points give an discounted value of the purchase (BEFORE any payment method is selected or used).
I agree that a true loyalty platform is one that should be available on many levels, not just a straight up ($ spent = X reward points). For us a loyalty platform is more an customer engagement tool than pure customer rewards.
Glad to see you're in the same park
Thanks,
Ryan