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Sentence Correction: Pronoun Questions - Ambiguity

In 1980, the U.S. Supreme Court awarded the Lakota nation a settlement for the taking of the Black Hills in violation of the Treaty of Fort Laramie, but the Lakota rejected it and continued to demand that their ancestral land be returned to them.

Incorrect.

This answer choice is stylistically flawed. The pronoun it is ambiguous because it agrees with more than one noun that appeared before it, and it is unclear whether it refers to the U.S. Supreme Court, the settlement or the Treaty of Fort Laramie.

[[snippet]]

Incorrect.

This answer choice repeats the original ambiguity mistake: the singular pronoun it agrees with more than one noun that appeared before it, and it is unclear whether it refers to the U.S. Supreme Court, the settlement or the Treaty of Fort Laramie.

[[snippet]]

In addition, replacing the word but with and changes the meaning of the original sentence.

Incorrect.

While this answer choice corrects the original ambiguity mistake by replacing the ambiguouspronoun it with the settlement, it changes the meaning of the original sentence by replacing the word but with and.

Very good!

This answer choice corrects the original ambiguity mistake by replacing the ambiguous pronoun it with the settlement.

Incorrect.

This answer choice is grammatically incorrect. The plural pronoun them does not agree with the singular noun settlement to which it refers.  

[[snippet]]
but the Lakota rejected it
but the Lakota rejected them
and the Lakota rejected it
and the Lakota rejected the settlement
but the Lakota rejected the settlement