D becoz ==>

A. it appears was an ancient lakeshore hunting ground as stunning evidence of human ancestors who
it doesn't have proper reference

B. it appears had been an ancient lakeshore hunting ground and stunning evidence that human ancestors

C. appears was an ancient lakeshore hunting ground and is stunning evidence that human ancestors

D. appears to be an ancient lakeshore hunting ground, stunning evidence that human ancestors
stunning evidence that ... correctly modifies researchers

E. appears that it is an ancient lakeshore hunting ground, stunning evidence of human ancestors who

Not an expert but my 2 cents,

"What" in itself is almost like a pronoun, therefore "it" is redundant and ambiguous, so A and B is gone.

Among C, D, E IMO D is correct because appears to be is an idiom, "Stunning xxxxx" correctly explain the outcome

Other mistakes

A appears was an - akward to me
B Had been - not needed, tense
C Same as A
E Appears that is in an - akward and wordy

imo c..wats the source?

Final solution at one place:

Important: The purpose of this post (and all the other posts by me) is to give a complete solution to all GMAT-Prep Verbal questions at one place. Sometimes students have to wade through dozens of posts to get to the final answer. My posts will give one complete and crisp solution required to arrive at the correct answer by eliminating the wrong one. Some of the content in these posts may have been taken from various other sources (discussion forums).

Researchers in Germany have unearthed 400,000-year-old wooden spears from what it appears was an ancient lakeshore hunting ground as stunning evidence of human ancestors who systematically hunted big game much earlier than believed.
(A) it appears was an ancient lakeshore hunting ground as stunning evidence of human ancestors who
(B) it appears had been an ancient lakeshore hunting ground and is stunning evidence that human ancestors
(C) it appears to have been an ancient lakeshore hunting ground and is stunning evidence that human ancestors
(D) appears to be an ancient lakeshore hunting ground, stunning evidence that human ancestors
(E) appears that it is an ancient lakeshore hunting ground, stunning evidence of human ancestors who

Imagine the sentence:

From what happened yesterday, I have drawn a lesson for life. CORRECT

From what 'it' happened yesterday, I have drawn a lesson for life. WRONG, obviously.

This is a similar construction, so 'it' appears will be wrong. This eliminates A, B, and C.

The use of 'it is' is wrong in E because the entire sentence is a conjecture at best (from available data). 'It is' shows certainty. 'Evidence that' is preferred to 'evidence of' as per the preferences on the GMAT. So E is wrong.

From MGMAT SC Guide:

V-A-N Pattern 2: Prefer a That-Clause (with Verbs) to a Series of Phrases (with Nouns)

Wordy: The hypothesis ABOUT the COMPOSITION OF the universe AS largely dark energy seems strange.

Better: The hypothesis THAT the universe IS largely COMPOSED OF dark energy seems strange.

When you tack a long thought onto a noun, try to put the thought in a That-Clause rather than in a long series of prepositional phrases. A That-Clause starts with the word that and contains a working verb (one that, as is, can be the main verb of a sentence by itself). Is composed is a working verb.

"Idea" nouns, such as hypothesis, idea, or suggestion, lend themselves particularly well to this pattern. Other examples include belief, discovery, evidence, indication, and report. These sorts of nouns are often modified by That-Clauses that contain full sentences:

The BELIEF THAT the Earth is flat is contradicted by EVIDENCE THAT the Earth is round and the DISCOVERY THAT the Earth circles the Sun.

Correct: D