Pain in the neck

I finished Boy 2’s sweater this weekend.  It was quick and easy.  That is, it was quick and easy until I picked up stitches around the neckline and put in a very simply 2x1 ribbed band.  After that, it didn’t fit over the boy’s head anymore!

Sorry for this truly terrible photo (I don’t want to lay this down outside right now – everything is covered with dew).  This is how it looks without the neckline (which I already tore out):It fits over his head fine like this.  The stitches around the neckline stretch and it goes over.  But after I pick up stitches, which is something you usually want to do in order to stabilize a notoriously stretchy and potentially saggy area, it doesn’t fit anymore.  It’s not about the 2x1 ribbed band (which was stretchy in its own right).  It was definitely the picked-up stitches that caused the problem.

I’m bummed.  The neck is the CAST-ON EDGE.  To redo it would require ripping out the entire sweater.  I used the formula in the this pattern and it resulted in a 36 stitch neckline.  I thought that sounded too small and upped it to 40.  I guess I should have trusted my instincts and increased it even more.

Here’s a close-up of the unfinished neckline, which really requires something to make it look more attractive, I think: Again, sorry about the glare off the floor (that' was even taken with no flash!).  So, what should I do?

1. I could try a different edging.  Maybe an applied i-cord  or a crochet edging (like crab stitch?) would be stretchier?  I’m not sure.  Couldn’t hurt to try.
2. Could I steek this a little to make a johnny collar look?  I’ve never done a steek and I’m not sure if you can do one if you didn’t plan to do one and leave a steeking area to cut.
3. I hate to put this down as an option, but should I rip the whole thing out and start over?
4. Is there some other simple way of finishing the rough stitches at the neckline that will not result in tightening them up too much?

Help needed!!!!