This requires accepting a claim the stimulus only presents as hypothetical. If you're drawn to (A), you're probably reasoning like this: understanding a word requires knowing its dictionary definition, so babies who don't know dictionary definitions must not understand those words. The problem is the first step. We don't know that understanding requires knowing dictionary definitions. That claim appears as the "if" part of sentence 1. It's a hypothetical. "If A then B" doesn't tell us A is true.

If it turns out that understanding doesn't require knowing dictionary definitions, then babies might understand every single word they say. We have no way to rule that out. If (A) had said "If understanding a word always involves knowing its dictionary definition, then some babies utter words they don't understand," it would have been something that must be true.

This could be false. If the "if" part of sentence 1 happens to be true (understanding always requires dictionary definitions), then nobody can understand words without dictionary definitions, and (B) is false. Since (B) could be false, it can't be something that must be true.

Even setting that aside, "any number of people" is very strong. Even in a world where some people can understand words without dictionary definitions, we wouldn't know that any number of people can do this. Maybe only certain people can, while others still require dictionary definitions.

Nothing in the stimulus connects babies to the words that might be understandable without dictionary definitions. You might be tempted by real-life intuition: if some words can be understood without dictionary definitions, those are probably easy words like "mama" and "dog," and you're thinking that babies understand those. But that line of reasoning isn't coming from the stimulus.

We don't know which words, if any, can be understood without dictionary definitions. What if those words happen to be "jurisprudence," "entropy," and "sarcasm"? There's no reason to think babies understand those. And even if the words overlapped with what babies say, "can be understood without a dictionary definition" just describes a property of the word. It doesn't mean every person who utters that word actually understands it. A word being understandable without a dictionary definition and a baby actually understanding that word are two different things.

This reverses the direction of the conditional. Sentence 1 tells us: if understanding requires dictionary definitions, then understanding requires understanding other words. (D) essentially claims the reverse: if understanding does not require dictionary definitions, then understanding does not require understanding other words. But "If A then B" does not mean "if not A then not B."

This must be true. The stimulus tells us babies utter words whose dictionary definitions they don't know. (E)'s "if" clause adds the claim that babies understand all the words they utter. Put these together:

Notice something interesting: this reasoning doesn't use sentence 1 at all. The entire proof comes from combining (E)'s "if" clause with the baby fact in sentence 2. The LSAT made this question feel harder than it needed to be by leading with a complicated embedded conditional that the correct answer doesn't even touch.

Also notice the contrast with (A). Both answers involve the question of whether babies understand the words they utter. But (A) flatly asserts that babies don't understand some of those words, which we can't prove. (E) puts its claim behind an "if" and only asks what follows if babies understand all of those words.