It can be a looooong process here compared to states like AZ, with your deposit being held for more than 6 months, so you have to understand the process.

All that's due is the security deposit, for you to return as long as no damages to the property. 

Mix and match these offers?

Most legal disputes are over security deposits and for small amounts.

The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations.

Laminate countertops can hold up pretty well and if damaged, will need to come out of the security deposit - lower cost product, so a larger percent of it gets paid for if damaged. 

If I were in your shoes and you wanted to keep them on MTM I would have them still sign a MTM lease and make the one resident pay a deposit, assuming you can sign new MTM leases in your area.I personally would still probably shift them to longer-term leases anyway, but it's not a bad idea to feel them out for a few months.

Also, is he entitled to the security deposit (minus any repair expenses)?

Ziprent will write the lease, execute it, then get the tenant in the unit and collect first month's rent and deposit.

Should I have them pay right now or out of security deposit whenever they move out?