It is possible. You can use JavaScript or a web service to do the lookup. How you set up the MC question depends on your data requirements (i.e., how you are going to analyze and report it) and if you are going to use standard Qualtrics piping and display logic or are capable of writing to JavaScript to modify the question.
I was thinking doing a loop and merge might be the right thing here. The webservice is easily done (already have the code). However, can you adjust a questions answers (expand and contract?). I see the display logic and that's straightforward enough, but what isn't obvious is how to create the list of choices dynamically.
so for option 1, I assume you mean parse the data which isn't an issue, but then is piping the labels dynamic? i.e. it will create the multiple choice options based on the array size?