It is sarcasm that really suggests not setting the boat on fire. This is the correct option.
This may be said by a person who is criticising somebody else's idea. The chances of being seen by someone in a boat on fire are almost non-existent. If they are still alive , someone may still see them if they remain in the current situation: no fire on the boat. Yet, if they set fire on the boat, they will certainly sink and die. In case someone sees the fire, will they arrive on time to rescue them?
These options are not right:
-It is ironic that destroying the thing keeping them afloat may save them. ( The speaker thinks he / she will be able to remain in the boat before it sinks. The speaker does not make reference to being kept afloat).
-It is satire related to an entirely different set of circumstances. ( There is not enough information to infer which the other circumstances are).
--It is understated despair for the serious situation. ( The situation sounds serious but " understated despair" sounds contradictory. "Understated" means discrete)