Bulk processing & deletion

Hello,

I have a table with a large number of records (millions), on which the
following should be performed:

    1. Retrieve a set of records by a SELECT query with a WHERE condition
    2. Process these in the application
    3. Delete them from the table

Now, in the default read-committed transaction isolation, I can't just
use the same WHERE condition with a DELETE in step 3 as it might delete
more records than are processed in step 1 (i.e. phantom read). I've
thought of several ways around it and would like some feedback on which
would be the most efficient:

#1: Create a giant DELETE WHERE ... IN (...) SQL command for step #3
with primary keys of records from step 1 - but will it hit a SQL string
length limitation in the database? Is there such a limit (and what is it?)

#2: Same as #1 but with batching the records to e.g. 1000 at a time, all
in one transaction

#2: Use a higher isolation level, probably Repeatable Read (PG 9.0) -
but then the question is will this block other clients from inserting
new data into the table? Also, is Repeatable Read enough?

Any other ideas?