Shakespeare’s Hamlet was based on a style of morality plays, wherein personifications of vice and virtue fight over a man’s soul; Shakespeare’s originality
lay in the fact that he integrated these personifications into the internal psyche of the protagonist.
Since the passage mentions that
'Hamlet was based' we know that the passage is in past tense .
Between lay and laid , lay will be preferred. 'Laid' is the past tense of 'lay' which requires an object and since the sentence doesn't specify any object, usage of 'laid' is incorrect .
(A) lay in the fact that he integrated these
Incorrect. Although this choice is similar to choice D , this choice might suggest that the originality lay in some factuality while the choice D suggests that the originality lay in the process itself. Thats why D gets an edge over A.
(B) lay in the fact of his integrating these
Incorrect. This construction of the sentence is incorrect because of the usage of
'fact of his integrating' which suggests that there is fact of some subject but that fact isn't mentioned and also the subject is not clear.
(C) laid in the fact of his integrating these
Incorrect. Usage of laid is wrong.
(D) lay in his integration of these
Correct - This choice properly maintains the meaning by stating that the originality lay in something. That something being - Shakespeare's integration of personifications - which acts as a noun phrase.
(E) laid in his integration of these
Incorrect. Usage of laid is wrong.