I have no interest in #2.   Itertools are all about *not* storing data in memory unless that is an intrinsic requirement for the operation (tee() and cycle() for example).

Also, I would like any changes to be minimal and have the lowest possible risk of breaking code.  The groupby() tool is about 13 years old and has served its users well.  These little corner cases we're working on now don't seem to correspond to how users actually use groupby or how it was intended to be used (either eat the sub-iterator right away before advancing the outer iterator or ignore it entirely).