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Option 1 states that the 73rd and 74th Constitution Amendment Act makes it mandatory for all States to establish a three-tier system of government. This statement is incorrect. The 73rd and 74th Amendment Acts actually mandated the establishment of a three-tier system of Panchayats in rural areas and Municipalities in urban areas, but it did not make it mandatory for all States to establish this system. Therefore, option 1 is incorrect.
Option 2 states that representatives should be directly elected for five years. This statement is correct. The 73rd and 74th Amendment Acts introduced direct elections for representatives in Panchayats and Municipalities for a five-year term. Therefore, option 2 is correct.
Option 3 states that there should be mandatory reservation of one-third of all seats in all Panchayats at all levels for women. This statement is correct. The 73rd and 74th Amendment Acts mandated the reservation of one-third of all seats for women in Panchayats and Municipalities. Therefore, option 3 is correct.
In conclusion, the correct answer is option 3 - 1, 2 and 3. The provided answer is correct.