D) enable auto schema migration like keycloak does, but with a special flag to enable it (I'd be 300% against enabling this by default)

Douglas Campos ah, that's what Keycloak does different? I can see that having this auto enabled is a risk, especially after all the lessons learned with the PR on this.

I think all I want is that for development I can simply deploy against app-server, and using H2 DB, but without any bogus "dev WAR file" or extra tweaking.

The main reason why I don't really care for DB migration on H2 is: nobody will ever use that in production, hence there is no need to support a migration on H2 - but the DB itself would be nice, and easy, to use.