I think you are kind of confused on several aspects so let me solve this question again:
Fossils of the arm of a
sloth found in Puerto Rico in 1991, and dated at 34 million years old, made it the earliest known mammal of the Greater Antilles islands.
(A) sloth found in Puerto Rico in 1991, and dated at 34 million years old, made it the earliest known mammal of
>> Remove the modifiers and see what is left: "Fossils of the arm of a sloth..made it the earliest known mammal..." - reject
(B) sloth, that they found in Puerto Rico in 1991, has been dated at 34 million years old, thus making it the earliest mammal known on
>> Remove the modifiers and see what is left: "Fossils of the arm of a sloth..has been dated at 34mn years..." - is fine so keep it.
(C) sloth that was found in Puerto Rico in 1991, was dated at 34 million years old, making this the earliest known mammal of
>> Remove the modifiers and see what is left: "Fossils of the arm of a sloth..was dated at 34mn years..." - is fine so keep it
(D) sloth, found in Puerto Rico in 1991, have been dated at 34 million years old, making the sloth the earliest known mammal on
>> Remove the modifiers and see what is left: "Fossils of the arm of a sloth..have been dated at 34mn years"
(E) sloth which, found in Puerto Rico in 1991, was dated at 34 million years old, made the sloth the earliest known mammal of
>> Remove the modifiers and see what is left: "Fossils of the arm of a sloth..was dated at 34mn years"
Second question to ask: is there SVA? For that we need to ask what is being dated? The sloth or the fossils? It has to be the latter so we can:
Eliminate B,C,E
Now let us compare A and D:
Were the fossils the oldest living mammal or the sloth? It is the sloth - so whenever you see 2 answer options where one of them replaces the pronoun with the right noun - there is a very good chance you are looking at pronoun ambiguity.
Therefore, D
Now I did not even use modifiers because in such questions it can get very confusing. Again, there are other errors but I am just showing you a simple way to get to the answer.
Here are some general rules:
A large section of the employees now have the choice to work from home -> WRONG
A large section of the employees now have the choice to work from home -> CORRECT
This is because in a prepositional phrase it will always be the subject of the phrase that decides the verb.
A box of toffees was kept on the table -> CORRECT
Now, let us see how it changes when we. use modifiers:
A box of toffees, which was made of caramel, was kept on the table -> CORRECT
A box of toffees, which was a gift from my friend, was kept on the table -> CORRECT
You can use this as a logic to govern adjectival modifiers such as [url=
https://gmatclub.com/forum/in-a-d-391-r ... 02162.html]appositives[/url], and
"which" modifiers.
Getting to your specific queries now:
embyforyou
I know that "that", "which", etc. modify the immediately preceding noun.
Not quite - look at the examples above. We also solve some questions in the CrackVerbal GMAT Online course which have (<- note the verb here!) this concept.
embyforyou
Can the same concept not be applied to the modifying phrase - "found in PR in 1991"? While solving, I assumed that this phrase is modifying sloth instead of "fossils of...sloth". The explanations say otherwise.
Remember: use logic to dictate the rules - not the other way around. The sword of the Maharaja of Gaipajama, found in the ruins of his palace, was sold by Rick in his pawn store --> CORRECT
embyforyou
Is there a rule that if the modifier is within two commas, it will modify the entire clause preceding it?
This is not a rule we ever discussed - where are you picking this stuff from?

embyforyou
Also, what if the modifier was - ",which were found in PR in 1991," - enclosed between two commas but starting with "which"? Would it still modify the clause or just the noun?
It will always modify the noun - why would it modify the clause? What made you feel that way?
I think you are over-analyzing stuff - stick to the basics!
Arun