Failed TLS negotiation

When a TLS negotiation fails (as distinct from a TLS protocol error), is
there a guarantee that all TLS packets are consumed, or is the socket in
an indeterminate state?

I'm interested in the scenario where both client and server are set to the
"use TLS if possible" mode (which I consider the correct default for
clients and servers -- both should also have a setting to insist on TLS).
In this scenario, when the TLS negotiation fails the most desirable option
is to continue the TCP connection in clear text.

Along these lines, I'm trying to think of what to say (and what to
implement) for the "STARTTLS" command in IMAP on a TLS negotiation
failure.  I'd be inclined to say that the server should: 

(A) close the connection if there's a TLS protocol error.
(B) Send a "* BYE TLS Required" and close the connection if there's a
    negotiation failure and the server requires the use of TLS.
(C) Continue the IMAP protocol if the server is willing to accept
    connections without TLS.

Comments?

		- Chris