In this sentence, “tout” is an indefinite adjective, modifying the indefinite article “un” of “un film”. It is used to denote the idea of a “whole/entire” thing, here an “entire movie”. Basically, if you say “se faire tout un film”, you are not just imagining a movie, you are imagining a whole movie, from A to Z, which involves more effort, goes into more details…

It’s the third option. (You make (to yourself) a complete film). It would be a better translation to use "whole" instead of complete.

It basically just amplifies what’s behind it, like it’s not just a "mini-movie" or a short, he’s really imagining a whole movie (so he’s imagining something way too big that will never happen).

Other example :

-T’as un pansement ? Tu t’es fait quoi au doigt ? (You have a band-aid? What happened to your finger?)

-Oh, c’est toute une histoire (Oh it’s a whole story)

i.e. there’s so much leading to that event that the events make a whole story.