Tired as you may be, read your quotes. Doing nothing other than being there, Magi with the gift aren't welcome. Try to do anything and chances are it will not workout as intended. Press the matter and you may get the pitchfork treatment. -3 is a lot... Akin to being cursed.
Use a companion....
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I think the actual situation is somewhere in the middle between the two above. Canonically:
The Gift has a strong emotional effect on those around the Gifted person, making them suspicious and mistrustful of the Gifted individual, inspiring envy. As a result, social interactions are very difficult for the Gifted.
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When roleplaying a character dealing with a maga, have him act as though she has a well-established reputation for dishonesty and unreliability, and for undeserved privilege of whatever sort is most important to him. Thus, a merchant acts as if he believes that a maga is wealthy through cheating people, while a lord acts as if he believes that the maga is a treacherous vassal who retains her position through bribery or similar.
I'd say this is a bit more than "just mistrust". It's a strong emotional reaction, that makes people behave as if they knew the Gifted to be a treacherous, unfairly privileged bastard of the worst type.
At the same time, it's not as if villagers will automatically try to burn the Gifted at the stake... though if there is a notion floating around that someone should be burnt at the stake (e.g. some heinous act was committed by an unknown party) the Gifted will look as the perfect, obvious candidate.
I would say that, if players do not dare take a Gifted character to a town, you are playing The Gift as harder than intended. On the other hand, if they are happy to have a Gifted character do the talking in town, you are playing it easier than intended.
Gaming anecdote:
A Blatant Gifted Magus and party were attempting to investigate a hidden temple after the scree slope covering it was disturbed by a minor earthquake.
They rigged a rope down the scree covered sloping passage-way for the magus to safely walk/climb down. Even with all the bonuses, the magus stumbled on the scree and came tumbling down.
The Companion of many years at the bottom of the slope attempted to arrest the mage's undignified descent. After the Companion succeeded at the relevant rolls, I made the Companion make a Bravery personality roll, against a target of 9 (because of the Blatant Gift, modified by several years of on/off exposure). His roll only reached 8 (no Confidence points).
Thus I ruled that as this Companion of many years tried to catch the flailing magus, he got hit by the effect of the Blatant Gift and "momentarily flinched", thus missed catching the magus by a tiny amount.
In the shadows at the bottom of the slope, the Companion may be the only character to realise that he froze and failed at his duty.
A little cruel as an SG, but I like it. 
A major flaw is a Major Flaw.
And the circumstances were sufficiently exceptional and dynamically uncertain that I figured it should unfaze most characters and weaken their resolve against a sudden in your face to face with Gift penalties.
In a spooky pagan temple underground with the only passage to sunlight filled with flailing, shouting figure flying at you, alongside kicked up scree I thought should require a Personality roll against a trait like Brave.
I think 5th ed did a good job of describing the effects of the Gift dramaticaly ratehr than just game-mechanically. Back when I played 4th ed we saw the Gift as just a '-3 to social rolls', and people either lived with that, circumvented it with enough other bonus (Aura of Ennobled Presence) or let someone else talk. But magi often went along to town or to visit nobles.
In 5th I got the impression that is was more than just -3.
The villagers have a mistrust not easily circumvented by good social rolls. Someone died horribly last year, of the crops suffer from a curse - and it was YOU who did it!