Here's the official explanation provided by the GMAC for this question:
The underlined portion of the sentence cites two purposes of rehearsing a legal argument before a group of practice jurors: (1) to check whether the practice jurors understand the argument; (2) to observe their responses to the argument. The two purposes, signaled by in order to, are best expressed by two parallel phrases conjoined by and. The infinitive form to observe should be paralleled by the infinitive form to observe.
Option A: This answer choice fails because for observation is not parallel with to assess. For example, observation (unlike assess) is a noun, not a verb.
Option B: The use of the passive verb form be assessed leads to an unnecessarily awkward sentence form—for example the juxtaposition of the conjunctions so that and whether. Also, this version misstates what is to be assessed, namely, the jurors’ reactions rather than observation of those reactions. Alternatively, observation might be absurdly read as a direct object of understand, along with the argument.
Option C: The verbal noun form observing is not parallel with the infinitive verb form to assess, and the resulting sentence is ungrammatical. The words or not are verbiage that serves no purpose.
Option D: Correct. This version correctly conjoins two parallel phrases to express the purposes of rehearsing a legal argument. The infinitive verb-form to assess is parallel to the form to observe. Moreover, the noun clause whether … argument that is the object of assess is parallel with the noun clause how … it that is the object of observe.
Option E: This answer choice has a failure of parallelism: for observation is not parallel with to assess. Purpose can be correctly expressed by so as to, but the failure of parallelism is sufficient to make the resulting sentence incorrect.
The correct answer is D.
Please note that I'm not the author of this explanation. I'm just posting it here since I believe it can help the community.