Just shred it all. You seriously don't want his credit cards getting used by someone else through you. It's nothing that's not replaceable and that's what he gets for being an asshole.
Sorry, but option #2 is stupid. It happened outside of an officer's presence, so matter how official anyone thinks this forum is, no on cares. No cop is gonna go cite him, lecture him or charge him. Most likely his shit will get dropped in certified mail and sent to him. FUkKIN' PiGS!!!
Now...What I would probably do, IF i wasn't in my current job, is make a copy of his DL. Send that and all the stuff you shredded along with a note inside the lipstick marked envelope explaining that his stuff was found, but because he rides like an asshole, you burned shredded it before paying the postage.
Ain't making any representations or inferences about whether That might be unlawful too or not ...Just so you know. In all this, don't forget that karma is a vengeful mo-fo. It will get him, with or without your help.