"Choice E uses the correct verb form, is, but it incorrectly introduces a dependent adverbial although clause into a prepositional phrase (with crests ...)."

The OG is basically trying to say that it sounds funny if you attach an "although... thing" clause to a "with... thing." I'm simplifying here, and trying not to use grammatical terms, but that's really what OG is saying.

For example:

Carl, with his new shoes and hat although they weren't very expensive, entered the room proudly.

Doesn't this sentence sound funny? This part:

although they weren't very expensive

is trying to modify (or explain a bit more about) this part:

with his new shoes and hat

But it doesn't work, does it?

It doesn't work because the "although... part" should be connected to a complete idea (i.e., a sentence), not just a "minor point" in the sentence.

To correct the example I just gave you, we would need to rewrite the sentence entirely:

Although Carl's new shoes and hat were not very expensive, he was very proud of them.

Hope that helps!