Realistically, this Is what I see too.
Give them a chance to stay up, but make it really difficult, then (at least) 1 season in the championship. It doesn't quite fit the crimes, but is probably be the best middle ground, and serves as a deterrent to other teams.
Then there is the amount of time it has taken. The Players nor the Manager(s) aren't at fault, so seems harsh to strip the titles, but how can you not? It's a right mess of the PL's own making. IMHO, the answer here, lies in the precedent set by Burnley vs Everton, so all clubs with a genuine case for loss of earnings/reputation could sue City, each one independently handled as a separate case.
I think it's unlikley for the PL to just expel them from the League, the FA want them involved too much. It may also reIgnite the question of the SuperLeague, which the worlds leagues don't want.