Does that mean I’m making the rules as the sponsor of the 401k, since I own the company?
No, it means that the agreement that you signed with eTrade to open the 401(k) governs the 401(k), so whatever rules eTrade has in place are the rules you signed up for. But since you are over 59 1/2, there should be a way for you to roll some of the 401(k) over into a Traditional IRA, even though you are still employed. So you should ask eTrade about that. Then, from the Traditional IRA, you can convert the money into your Roth IRA.
Could I distribute the assets to a SEP IRA and then convert to Roth?
Yes, you could roll to a SEP IRA and then to a Roth IRA, but I’m not sure why you would want to do that instead of rolling to a T-IRA and then to a Roth IRA, unless eTrade says that it will be easier to roll to a SEP IRA instead of a T-IRA.
AJ