Wow... this is a tough one.

Is the answer B. when the insect stops at regular intervals it signals, that the insect is tired, and after a moment's rest, it resumes the chase.

Choices A, D and E do not support either of these theories.

Even C looks a little plausible. When the beetle increases its speed after a chase, it could signify that the beetle has regained sight, and sees the prey slipping away, and runs even faster to catch it.

For now, my answer is B

Picked C.

If they rest as specific time intervals even if visual info is changing at different rates , they do so not to process info, in which case they would pause much frequently when in hot pursuit , and less frequently when they move slowly.
That they have to pause at specific intervals, not matter what the situation is suggests it as being a pause to recoup.(probably they can't breathe while running and they have to breathe at fixed intervals )

HMTG.

I am reviving this post, anyone have a better explanation?

This question is very debatable since there are a lot of correct answers hovering around. I initially selected (E) as the correct answer, however on reviewing the answer choices again, I think (C) is the correct answer choice.

Here is my attempt to crack the answer choices.
When we attempt to select the answer that supports one theory and undermine the other, the best way to approach the problem would be to each answer choice and see whether it strengthens one theory or the other.
Similarly repeat the above step, with other choices.
After selecting the choices that support one theory, we would see whether the same choices undermine the other theory or not.

X(A) this is irrelevant to either theory (1) or (2). It neither supports any of the theories. So this choice is eliminated.
(B) This choice undermines theory (2). The beetles process the visual information immediately. We need to keep this choice.
(C) Theory (2) says that RUNNING beetles are unable t process the rapidly visual information, and they quickly go blind and stop. This choice says that when the prey starts to flee, the beetle increases its speed after the next pause. This means that it is able to process rapidly what it needs to do after the next pause. Note that this answer choice is not saying that it's not running while processing the visual info. All it says that it starts to run rapidly after the next pause. It means that while running, it decides that after the next pause it needs to increase it's speed. Note that it still needs to take the pauses - as it maintains a fixed time interval between them. Contender so keep it.
X(D) This is irrelevant to either of the theory.
(E) Strongly supports Theory (2). So keep it.

Now we are down to choices B,C and E.

X(B) Already undermines (2), so we need to show it supports theory (1). However pausing equally frequently going up or down, at best shows that it doesn't take pause to rest for the moment. It takes pauses for sthg else. So it doesn't support theory (1). Knock it off.
X(E) Supports theory (2), so we need to show it undermines theory (1). However it doesn't even remotely address theory (1). Discard it.
(C) Note that beetles takes the pauses for the fixed time intervals. So it supports theory (1). As addressed earlier it undermines theory (2), since while running it when it sees the prey flee, it takes a pause - for a moment of rest - and then increases its speed. So it is able to process the visual info rapidly.

This question esp (C) has sentence which is confusing to understand, and we may even knock it off for reason that is completely opposite of what the actual reason is. I feel GMAC sometimes to make questions difficult, convolutes the meaning of sentences.

Thanks
Prashant