Hi-
This is a question of standard expression not x but y which equals parallel entities. In order for the two entities to be parallel they must have the same part of speech.
to participate=infinitive/ noun
it affirms= verb
So are they parallel? No they are not
So we need to find the answer that follows the parallel structure and provides a noun.
It could be argued that the most significant virtue of a popular democracy is
not the right to participate in the selection of leaders,
but rather that it affirms our importance in the scheme of things.
(A) but rather that it affirms-
incorrect as stated above(B) but rather its affirmation of-
parallel as affirmation is a noun(C) but rather it’s affirmation in terms of-
overly wordy-"in terms" is not needed to complete the meaning(D) but instead of that, its affirming that-
overly wordy- the use of that is redundant and not needed(E) affirming rather-
does not provide but which is needed with not
so B is the best and correct answer!
Hope this helps