I re-read the stimulus many times before making sense of the simpler idea that warm beetles replaced cold beetles 500 years before spruce forests replaced ice masses. Answer choice E helps to make sense of this which is why I chose it.

An absolutely horrendous lesson. As many others have stated, this makes much more sense following the kick it up to the domain lesson from earlier and simply having:

/prohibited -> serve a medical purpose

These frameworks wildly complicated things, and as someone else stated, would likely be significantly more helpful if applied to actual questions instead of these hypotheticals.

I believe the first "that" is being used as a modifier as reviewed in a previous lesson and is not a referential phrase as it is not standing in for anything else. If you try replacing the first "that" with something else, the sentence would not still make sense.