Lindsay Lohan -- Options: House Arrest or Risk JAIL!

Lindsay Lohan has been cut yet another break in the criminal justice system -- prosecutors are offering house arrest to end her lying-to-cops and probation violation cases, but we're told she's NOT biting.

Multiple sources connected with the case tell TMZ ... the Santa Monica City Attorney and the L.A. City Attorney have both softened their position from lockdown rehab to 90-DAY HOUSE ARREST.

In fact, we're told Lindsay's lawyer, Mark Heller, is telling prosecutors Lindsay will accept a certain amount of house arrest. Right now Heller and the prosecutors are squabbling over how much house arrest. But here's the problem ... sources connected with Lindsay are telling us LiLo is adamant -- she will not accept ANY punishment.

Bottom line -- sources connected with the case tell us there's a 75% chance the case will go to trial on March 18th. If Lindsay rolls the dice and is convicted, she faces months of ACTUAL jail time.