This is a necessary assumption question. The core reads as the following:
Caronian-speakers lived in disjointed, widely-scattered, areas
→
Cannot form a single nation of Caronian-speakers in which they are the majority
The gap here is playing on your common sensical desire to over-infer. We traditionally think of nations as whole units of land inhabited by a somewhat homogenous group of people. However, we have not been given this definition of a nation so, for the purposes of the LSAT, we might as well throw our own definition out the window! The gap here is between the areas of land and the idea of nation, namely, the argument is assuming that a nation cannot be formed by the disjointed and widely-scattered areas of land that the Caronian-speakers inhabit.
(A) We don't care about a nation that "once existed." We care about the nation now and the possibility of its fruition. Let's a nation did actually exist at one time. What does this have to do with anything we are discussing here?
(B) There are two things wrong with this. (1) We do not care one bit about how Caronian speakers perceive themselves. They could perceive themselves as a band of hippopotamuses but it doesn't change the conclusion that the recommendation could not be satisfied. Perception and actuality do not very often go hand-in-hand on the LSAT. (2) A "community" does not equal a "nation." This is, once again, and over-inferrence and we want to avoid those.
(D) Tricky! If you selected this you probably forgot about the little tidbit in the conclusion saying that the Caronian-speakers are to form the majority, not the entirety. There can definitely be other types of people in this nation. Furthermore, this answer choice is already making the assumption that the new nation will actually exist! In other words, it is assuming the opposite of the conclusion! No good. Finally, as if the previous reasons weren't good enough, we know nothing about citizenry.
(E) Easy elimination because we don't care about any other nations let alone "most nations." Quickly get rid of this one and move on!
(C) is correct because it attacks the gap that we saw earlier, the gap between a "nation" and the land it encompasses. (C) is saying that there is no way that we can satisfy the recommendation while having unconnected land. If we assume the opposite of (C), it destroys the conclusion by making it possible that the recommendation be satisfied.