A question from an older version of the GMAT

Here is a sentence-correction question from an older version of the GMAT:
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Scientists have recently discovered what could be the largest and oldest living organism on Earth, a giant fungus that is an interwoven filigree of mushrooms and rootlike tentacles spawned by a single fertilized spore some 10,000 years ago and __extending__ for more than 30 acres in the soil of a Michigan forest.

(A) extending
(B) extends
(C) extended
(D) it extended
(E) is extending
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I have seen the "correct" answer, and while I can agree with the logic to some degree, I don't find it completely satisfying. I also think this sentence is a convoluted mess that would be ripped apart by any self-respecting English professor!

Here are my specific questions that relate to the sentence above:

1) In English, when we have a past participle such as "spawned," do we also have a rule to determine exactly what it modifies? IOW, does the participle always modify the closest preceding noun, or does the situation just depend?

2) In the same vein, do we have "hard and fast" rules to determine what a present participle modifies as well?

3) Is it appropriate to mix tenses of participles that modify a particular noun?

4) What do you think of this question/sentence in general?

Thanks for any input.