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My answer is (E). It took me 38 seconds.

(A) "Noticing that the fossils were too delicate to be removed from the rock" is not an independent clause. It is a modifier. No need to use conjunction "so".
(B) See above.

(C) "the fossils" are plural (as evidenced by the use of "were" in the participle modifier), so "it" should be "them".
(D) See above. Also, "brought them" should be " brought it" to refer to the block of stone.
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The original sentence is :
Noticing that the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing them and brought it to their lab.

In the above sentence-
1. The verb+ing phrase modifier + comma modifies the subject of the subsequent clause. Thus, the subject "the team" should not be preceded by any conjunction.
2. The main verbs "dug up" and "brought" are connected by coordinating conjunction "and" , thus they need to be parallel as they are.
3. Meaning and Pronoun ambiguity -
What was encompassing the stone? - of course the delicate fossils that were to be removed from the rock. Thus, "they" refers to the fossils. There is no other plural antecedent to have any confusion.
What was brought to the lab? - the stone encompassed by the fossils. Thus, "it" refers to the stone correctly.


Now, let's looks at the choices.
A) so the team dug up a block of stone encompassing them and brought it to the lab.
The subject "the team" should not be preceded by any conjunction.
B) so the team dug up a block of stone encompassing them and brought them to the lab.
The subject "the team" should not be preceded by any conjunction.
C) the team dug up a block of stone encompassing it and brought it to the lab.
Pronoun ambiguity - The stone can't encompass itself, but the fossils. "IT" can't refer to the fossils.
D) the team dug up a block of stone encompassing it and brought them to the lab.
Pronoun ambiguity - The stone can't encompass itself, but the fossils. "IT" can't refer to the fossils. Also, "them" can't stand for the stone
E) the team dug up a block of stone encompassing them and brought it to the lab.
Correct. Fixes all the issue considered in the original sentence.


generis
The original sentence and choice A are not the same (i.e. "their lab" in the original while "the lab" in the choice A). Please fix.

IMO E
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1. Non underlined portion is the participle phrase and it must be followed by the Noun that it modifies after comma
A and B are out

2. C/D/and E are similarly constructed with variations in pronoun

Focus on meaning and logical referent to pronouns
Team dug up block of stone encompassing "Fossils" and brought "block of stone" to the lab
First pronoun shall refer to fossils/Plural i.e "them" and the second to "block of stone" /Singular i.e "it"
Also there is no logical plural noun in the sentence other than fossils

(E) is the Answer
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Noticing that the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing them and brought it to their lab.


A) so the team dug up a block of stone encompassing them and brought it to the lab. --> "Noticing" is modifying team so it should be followed by the team, but here it is followed by conjuction "so", incorrect

B) so the team dug up a block of stone encompassing them and brought them to the lab. --> incorrect same as A

Now, meaning of the sentence: the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing "fossils" and brought "stone" to the lab

C) the team dug up a block of stone encompassing it and brought it to the lab. --> it can not be the antecedent of fossils, incorrect

D) the team dug up a block of stone encompassing it and brought them to the lab. --> it can not be the antecedent of fossils, incorrect

E) the team dug up a block of stone encompassing them and brought it to the lab. --> them (fossils) and it (stone), correct
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E in my opinion. Took 55 secs.

Errors:

'Noticing' is modifying the team. Therefore, discard A and B.

Brought it/them to the lab. The team brought the block back to the lab which is singular, so it should be 'it'. Discard D.

Between C & E: The encompassing refers to the plural Fossils. Therefore, it should be 'them'. Discard C


E is the answer!
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Noticing that the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing them and brought it to their lab.


A) so the team dug up a block of stone encompassing them and brought it to the lab. --> INCORRECT as non-underlined part of the sentence is a modifier, and hence no need for "so".

B) so the team dug up a block of stone encompassing them and brought them to the lab.--> INCORRECT as non-underlined part of the sentence is a modifier, and hence no need for "so".

C) the team dug up a block of stone encompassing it and brought it to the lab. --> INCORRECT as fossils is plural, and 'it' should be replaced by 'them'.

D) the team dug up a block of stone encompassing it and brought them to the lab. --> INCORRECT as fossils is plural, and 'it' should be replaced by 'them'. Also, usage of 'them' is incorrect because rock is singular.

E) the team dug up a block of stone encompassing them and brought it to the lab. CORRECT - pronoun usage is corrected and no conjunction is used to connect the modifier.
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Noticing that the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing them and brought it to their lab.


A) so the team dug up a block of stone encompassing them and brought it to the lab. Incorrect

B) so the team dug up a block of stone encompassing them and brought them to the lab. Incorrect

C) the team dug up a block of stone encompassing it and brought it to the lab. Incorrect

D) the team dug up a block of stone encompassing it and brought them to the lab. Incorrect

E) the team dug up a block of stone encompassing them and brought it to the lab. Incorrect


Noticing introduce a modifier, who noticing? must be the team; so uses wrong at the beginning of sentence
Eliminate A & B

a block of stone encompassing fossils, which is plural; so it uses wrong
Eliminate C & D

Answer E
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ERROR ANALYSIS -

1) There is verb-ing noun modifier. It should modify - the team

ANSWER CHOICE ANALYSIS -

A) There is verb-ing noun modifier. It should modify - the team
B) There is verb-ing noun modifier. It should modify - the team
C) 'it' refers to fossils - plural - WRONG
D) 'it' refers to fossils - plural - WRONG
E) CORRECT
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Noticing that the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing them and brought it to their lab.

Analysis: Modifier - The the subject "the team" should immediately follow the comma. As a verb+ing modifier is modifying the subject of the sentence, 'so' is not required. SVA - 'them' correctly refers to the plural 'fossils'. 'it' correctly refers to the singular 'rock'

A) so the team dug up a block of stone encompassing them and brought it to the lab.

B) so the team dug up a block of stone encompassing them and brought them to the lab.

C) the team dug up a block of stone encompassing it and brought it to the lab.

D) the team dug up a block of stone encompassing it and brought them to the lab.

E) the team dug up a block of stone encompassing them and brought it to the lab.

Answer should be Option E.
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Noticing that the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing them and brought it to their lab.

A) so the team dug up a block of stone encompassing them and brought it to the lab. -> "noticing..." is a modifier. There is no need for "so". Incorrect.

B) so the team dug up a block of stone encompassing them and brought them to the lab. -> same as A. Incorrect.

C) the team dug up a block of stone encompassing it and brought it to the lab. -> "encompassing it" is incorrect, "them" should be used for fossils.

D) the team dug up a block of stone encompassing it and brought them to the lab. -> "brought them" is incorrect, "it" should be used for a block.

E) the team dug up a block of stone encompassing them and brought it to the lab. -> It is better.

So, I think E. )
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Noticing that the fossils were too delicate to be removed from the rock, so the team dug up a block of stone encompassing them and brought it to their lab.

Error Analysis:
1. "Noticing" is acting as modifier, it should be modifying the team
2. Sentence has structural Error - Verb-ing - coordinating conjunction (so) - main clause - coordinating conjunction is used connect the two independent clause. here "SO" in other role does not make sense
3. Sentence has lot of pronoun - will use meaning to eliminate the options



A) so the team dug up a block of stone encompassing them and brought it to the lab. - Structural Error

B) so the team dug up a block of stone encompassing them and brought them to the lab.- Structural Error

C) the team dug up a block of stone encompassing it and brought it to the lab.- "it" is singular and can refer to other singular noun (team /block of stone)
it can be written as -the team dug up a block of stone encompassing it (block of stone) and brought it (block of stone) to the lab
- first "it" does not make sense


D) the team dug up a block of stone encompassing it and brought them to the lab.
- the team dug up a block of stone encompassing it (block of stone) and brought them (fossils) to the lab.
- same as C


E) the team dug up a block of stone encompassing them and brought it to the lab.
- the team dug up a block of stone encompassing them (fossils) and brought it (block of stone) to the lab. - usage of both pronoun make sense- CORRECT
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The official explanation is here.
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