Use of drones is better than sending in troops in most cases. Given that the enemy in this case is a loose organization rather than a state, they can be in places where we just can't send troops to capture them. Using troops would probably result in far more bystander casualties.
If someone among the enemy organization happens to be a US citizen, I have no problem with the notion of using a drone against them. I also have no issue with some form of judicial oversight - if an American citizen living abroad has enough evidence against them to label them a terrorist and there is no practical means of bringing them in for a trial, then it shouldn't be too big of a deal to get a panel of judges to sign off on authorizing a drone strike if the opportunity should arise.
For the most part, I agree with this. However, I think judicial oversight is an absolute must. We need to set up a special court for this, much like the FISA Court. I'd also say that drone strikes should only be allowed in areas where Congress has given specific authorization. I do not trust the executive branch with that much power without judicial and Congressional oversight.
I did vote for the first option (though with some reservations), but there needs to be standards and rules in place. The standard for the first option needs to be considerably high, certainly higher than for non-citizens. And, as I said above, strict judicial oversight over drone strikes is absolutely necessary.