You are right; option D is the best answer.
1. The first clause of option A is grammatically correct, but after the comma AND WITH creates a problem. Keep in mind that WITH has got to indicate some kind of connection or association, that it is commonly misused, and that it is one of the most problematic prepositions in the GMAT precisely for this reason.
Look at this example:
Milk is often mixed with powdered chocolate OR WITH coffee at breakfast-time. . Here, the conjunction OR has a function, which is to indicate an alternative, and WITH has a function, because one mixes something WITH something else: the two things enter into association. In option A, however, AND has no function; what exactly is it joining? And WITH is worse, because what is WITH what? The town WITH its streets? But this is nonsensical; a town is not WITH its streets; rather, it consists (in part) of those streets. (Furthermore, given the construction used in this option, the adjectives VACANT and DILAPIDATED should precede their respective nouns, not follow them.)
2. The idiom in option B is incomplete and therefore incorrect: it should be HAILED AS, and not simply HAILED. Moreover, the clause
and has streets vacant and buildings vacant is unidiomatic; towns do not HAVE streets or buildings in this or that condition. Worse still, the AND seems to imply, paradoxically, that being a ghost town and having streets and buildings in a run-down state are somehow two distinct things.
3. Option C is incorrect because it lacks a verb.
4. In option D, the idiom HAILED AS is correct and the final phrase
its streets vacant and buildings dilapidated correctly modifies, without any unnecessary WITH, the previous noun TOWN.
5. In option E, there is no verb (in order for the participial adjective HAILED to become a verb, an auxiliary must be attached to it, as happens in the correct answer) and HAILED is lacking AS.
This is not a very good question, in my view. The verb TO HAIL AS is positive in meaning: one might HAIL a writer AS the best since Shakespeare; one could also HAIL a scientific discovery AS a solution to the problem of excessive use of plastic. The verb also has the sense of
greeting for the first time. Neither of these senses of the verb is present here. It is difficult to think of anyone HAILING Bannack or any other place AS A GHOST TOWN - just as it is to think of anyone HAILING castor oil AS a repulsive substance.
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