None of these is correct - B or C have a chance it you add a modifier to the beginning to necessitate the use of a transition like "nevertheless", for example:
Despite some well-publicized brushes with drugs and alcohol, Michael Phelps is nevertheless exemplary...
But without that there isn't a rationale for using the transition, and in A "no less" needs to have a comparison attached to it. You're definitely correct that D and E create an improper comparison between Phelps and virtues.
Just because I've seen a lot of these recently, I'd urge everyone to be careful with the SC questions that you choose to practice from - for whatever reason early 2011 seems to have created a boom in the number of lackadaisically-written practice Sentence Correction questions that are now in circulation. For the sole purpose of practice with eliminating poor answer choices, I suppose it's not that bad, but be careful putting too much emphasis on from-out-of-nowhere practice questions - there are still plenty of good ones out there so I'd prioritize those.
Brian Galvin
GMAT Instructor
Chief Academic Officer
Veritas Prep
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