Register child born outside UK as British Citizen

Apologise if this has been asked already but I couldn't find my answer. I am applying to register my Nephew and Niece (both are under 18 and were born outside UK) as British Citizen using MN1. They both came to UK as EEA family members in 2018 and both got their Settled Status last year on 24/04/24 and living in the UK for 6 years continuously. Their father has got British Citizenship in 2023 after being on Settled Status for a year and their mother has also got Settled Status so its a straight forward case. When filling in MN1 online application form, I am confused which option to select from the options below:

Choose which category to apply under. You are a child under 18 and:

1. Your parent is British by descent and lived in the UK or a British Overseas territory for at least 3 years before you were born

2. Your parent is British by descent and you and your parents (unless they are legally separated) are now living in the UK or a British Overseas territory

3. You were born on or after 13 January 2010 and your parent was serving in the UK armed forces

4. You were adopted abroad by British citizen parents

5. You were born before 1 July 2006 to a British father and your parents were not married

6. One or both of your parents is applying for British citizenship

7. Other - apply at the discretion of the Home Secretary

None of the options above make make sense to me. Perhaps option 7? Please advise.

My second question: Do I need to make separate application for both my Nephew and Niece or I can add them together on one application? Please note that they both have got their fee waived by HomeOffice and will be using the token provided by HomeOffice for the payment.

Select 7. Other.
You should be able to add them both to one application, however for practical purposes it is exactly the same as the applications will be assessed separately. It is perhaps easier as you have fee waivers to do two separate applications.