So, a terminological caveat first: I've argued elsewhere that in practice all values are instrumental, and exist in a mutually reinforcing network, and we simply label as "terminal values" those values we don't want to (or don't have sufficient awareness to) decompose further. So, in effect I agree with #2, except that I'm happy to go on calling them "terminal values" and say they don't exist, and refer to the real things as "values" (which depend to varying degrees on other values).

But, that being said, I'll keep using the phrase "terminal values" in its more conventional sense, which I mean approximately rather than categorically (that is, a "terminal value" to my mind is simply a value whose dependence on other values is relatively tenuous; an "instrumental value" is one whose dependence on other values is relatively strong, and the line between them is fuzzy and ultimately arbitrary but not meaningless).

All that aside... I don't really see what's interesting about this example.

So, OK, X is a pedophile. Which is to say, X terminally values having sex with children. And the question is, is it rational for X to choose to be "fixed", and if so, what does that imply about terminal values of rational agents?

Well, we have asserted that X is in a situation where X does not get to have sex with children. So whether X is "fixed" or not, X's terminal values are not being satisfied, and won't be satisfied. To say that differently, the expected value of both courses of action (fixed or not-fixed), expressed in units of expected moments-of-sex-with-children, is effectively equal (more specifically, they are both approximately zero).(1)

So the rational thing to do is choose a course of action based on other values.

What other values? Well, the example doesn't really say. We don't know much about this guy. But... for example, you've also posited that he doesn't get fixed because pedophilia is "part of who he is". I could take that to mean he not only values (V1) having sex with children, he also values (V2) being a pedophile. And he values this "terminally", in the sense that he doesn't just want to remain a pedophile in order to have more sex with children, he wants to remain a pedophile even if he doesn't get to have sex with children.

If I understand it that way, then yes, he's being perfectly rational to refuse being fixed. (Supposing that V2 > SUM (V3...Vn), of course.)

Alternatively, I could take that as just a way of talking, and assert that really, he just has V1 and not V2.

The difficulty here is that we don't have any reliable way, with the data you've provided, of determining whether X is rationally pursuing a valued goal (in which case we can infer his values from his actions) or whether X is behaving irrationally.

(1) Of course, this assumes that the procedure to fix him has a negligible chance of failure, that his chances of escaping monitoring and finding a child to have sex with are negligible, etc. We could construct a more complicated example that doesn't assume these things, but I think it amounts to the same thing.