Good question, pf
Answer choice E is incorrect because it seems to give equal weight to reproduction as osmoregulation. However, reproductive hormones are only mentioned in the first sentence and then never again. In contrast, lines 9-58 discuss regulation of how the body balances solutes in body fluids.
This is a good example of how not paraphrasing could lead you astray. I don't think you would put reproduction in a ten word prephrase.
E is deficient in that it doesn't use the word hormone (choosing the vaguer "mechanism") which should be a part of any main point answer. The real compare/contrast in this passage is not between reproduction and fluid balance but between hormones biological effects and its behavioral effects, which again, is absent in E but present in the correct answer, D.
In testing this, you could try to work backwards. If you were to write an essay using E as the main point, I think you would include much more discussion about reproduction. You would probably include parallels between reproductive mechanisms and thirst/sodium mechanisms.
Thesis statement: Reproduction and fluid balance are governed by the body using similar mechanisms.
Body paragraph I: First example of how thirst and reproduction are similarly governed
Body II: Example 2 of how they are similarly governed
Conclusion: they are similar
But if you were to back-plug D, you would get something like this:
Thesis statement: Hormones regulate the body using both physiological and behavioral responses.
Body I: Physiological changes to hormone response to changes in osmality
Body II: Behavioral changes to hormone response to changes in osmality
Conclusion: these two changes complement one another
We can see that the second example is basically what is going on in the paragraph, with a heavy dose of explanatory text in the first paragraph. The argument really gets going at line 34 (and was summarized in lines 6-9). The appearance of both behavioral and physiological effects of hormone regulation is the key to this passage. It is wholly absent in E.