I think that the answer to this depends very much on your interpretation of:
activated immediately if the wearer falls more than 5 feet.
and whether you would consider the downwards floating effect of the featherfall spell to be falling.
So - let's look at the options:
- A continuous fall, no matter how far, only triggers the ring once: The ring just removes 65' from the fall regardless of how far you fall (as per possibility a in the question).
- A continuous fall can trigger the ring multiple times but floating downwards is not a "fall" and thus doesn't trigger the ring: The ring triggers, shuts off, triggers etc as per possibility b in the question. This results in 2d6 damage.
- A continuous fall can trigger the ring multiple times and floating downwards is considered a fall for the purposes of triggering the ring: The ring triggers continually on the fall downwards (after the first 5') and thus the wearer floats all bar the first 5' downwards and doesn't take any damage.
Looking at the description of featherfall:
The affected creatures or objects fall slowly
This rather suggests to me that on the question of what constitutes a fall, the slow fall of the spell would be enough.
I can't find any definitive guidance on the question of triggering conditions so I don't think there's a definitive RAW answer we can point to. However you could certainly look at the implications of your choice as a GM:
For #3 there's very little difference as to what the CL is for the item (other than dispels etc) - it results in an item that allows unlimited falling no matter the power of the creator.
For #1 and #2 you can be entirely safe from falls up to a certain height based on the power of the creator and how much effort they put into creating the device. Although #2 has a sort of semi-random effect beyond that height depending on quite how far you fall and how that relates to the power of the item.
There are a number of other items that also change the way falling damage is calculated and some of them are quite clear in the fact that they remove x' from the fall (see this question for an example or two). They're generally cheaper than a ring of featherfall and so it seems reasonable that the ring might be considered more powerful.
So - where would I go? Depends a bit on the game I was running but I'd rule #2 out straight from the off. Why? Firstly it's just a bit too random for falling beyond the first increment (of 65' feet for CL1) as to how much damage the wearer would actually take. It's also a pain to work out.
Between #1 and #3? I would tend towards #1 on the whole. 65' is a pretty good distance to fall and so the item is powerful enough for most purposes most of the time. It's also enough to justify the price, IMHO. It also allows a PC artificer to craft their own at a later time to improve on the original (by having it invested with a higher CL) if they so choose. Finally - it allows me, as a GM, to put into the game situations where the ring is not sufficient (and without resorting to anti-magic zones etc).