The seaside hotel in Torquay inspiring John Cleese to create the beloved British sitcom Fawify Towers during the 1970s and was known of late for hosting Favwity Towers —themed events which attracted a steady stream of fans from across the world, is being demolished to make way for retirement homes.
(A)
inspiring John Cleese to create - inspiring is not correct (should be
inspired/had inspired since the sentence is in past tense)
(B) that inspired John Cleese
in the creation of- in the creation of is not correct (to create usage looks good)
(C) that was
inspirational for John Cleese
in creating - same as A and B
(D) that
has inspired John Cleese to create - present perfect is incorrect
(E) that
had inspired John Cleese
to create - both had inspired and to create is correct usage.
Had inspired is correct usage because the sentence talks about two events in past. The hotel had
inspired.......and was
known of late- (of late denotes a latter event)
Hence I would go with E.