IMO C
Since the underlined part is very small, we can instantly scan the answer choices and rule out the ones that are incorrect. To do this SC in just less than 1 min., cut the extra stuff and see how the sentence looks like.
Recent excavations suggest that the ancient peoples ... merged the cult of Damia ... with Venus.
Now, lets look at the answer choices:
(A) with Venus -> the cult of Damia is not merged with Venus. Either 'Damia can be merged with Venus' or 'the cult of Damia can be merged with the cult of Venus'. Therefore, INCORRECT.
(B) and Venus -> Merge X and Y is incorrect idiom. The correct form is 'Merge X with Y'. Therefore, INCORRECT.
(C) with that of Venus -> Proper idiom (merge X with Y) and parallel sentence (merge the cult of A with that of B). Therefore, CORRECT.
(D) and Venus' -> Incorrect usage of apostrophe('). Venus' what?? Therefore, INCORRECT.
(E) and Venus' cult -> May seem right but rule out because of AND. Merge X and Y is not idiomatic here. Another thing is, the sentence says 'cult of X', so the second part should be 'cult of Y', not Y's cult. Therefore, INCORRECT.
Therefore, C.
Thanks.