I would arrive at a ruling like this
- Magic need not obey scientific principles (in fact, magic ought to disobey scientific principles)
- RAW allows a reaction to be taken to falling, for example feather fall uses a reaction and is intended to soften a fall
- By RAW you can't ready misty step, but you could ready a different teleportation spell - one that is cast with an action
- I would rule that the character takes only the falling damage they were due up to the cast - 2d6 - albeit they could just as easily have triggered their reaction at the start of their fall and taken no damage (the falling 20' part first is peculiar: was it chosen to make the case more interesting?)
So I would allow it to work in principle, but not with
misty step.
@Galandris None of your solutions 1-7 capture my reasons, although I agree any solution will present problems and that some will be lesser than others.