Michael Freda,
Deed in lieu might make your report slightly better than Foreclosure; however, both are bad enough. In both the cases, your account will be reported as closed by creditor. The only favor that you get with deed in lieu is it reduces the ‘late period' as the process is faster than Foreclosure.
Deed in lieu excludes court procedures, attorney fees; it saves some time and helps you to avoid the mental strain. These are the reasons for you to go with deed in lieu; otherwise it is almost as ugly as Foreclosure.
I can see that there is a gap of 8000 that you should cover up if you go for short sale. Present valuation of the prop is 133,000 and you owe 141,000. Even though you sale it, you have to arrange that 8000, so that is the problem with short sale here.
However, people often suggest avoiding Foreclosure as it stays in your report for 7 years. Your score is already very good. So if you be attentive, you can rebuild your credit very soon.
That was all from my point of view. Hope some other forum members will put some more information here. Best of luck.