Samantha,  this is not at all helpful.  I am aware of that knowledge base article and I saw it when I submitted a support ticket for this.

Option #1 is not use friendly at all, and as for option #2, they can't just use a different billing address, because then it would not match their credit card's billing address.

Blackbaud needs to come up with a solution for this, like allowing AA/AE/AP in the state field but automatically switching to "light" AVS in such cases.

There is an underlying issue with credit card processors and the ISO standards they require. AE, AP, or AA is not within the ISO standard for US so it would not be accepted as valid or show on the payment form.

I have included info from a KB solution that outlines this in more detail:

You may have patrons or donors overseas with an APO/FPO address. Their states (AE, AP, AA) are listed when they enter their billing address, but when they go to enter their payment information, they do not see these options under state. This Knowledgebase will provide you with the solution to help your donor complete their purchase.
Article Number: 66988


Your patron will not see the options for AE, AP, or AA when they enter their billing information. This is because credit card processors have requirements to receive ISO accepted states when processing transactions.  AE, AP, or AA is not within the ISO standard for US so it would not be accepted as valid or show on the payment form.

To process the transaction successfully, you have two options:
1. You can enter the address by entering AE, AP, or AA in the field for City and selecting California as the State.
Address (Example: PO Box 08)
City (FPO AP)
State (CA), Zip Code
 
2. Have the patron use a different billing address.