Looking through the WebGUI documentation heeds this information:
When the Locate Named Inputs and Outputs property is set to Dynamic, the appliance examines the values of the var://local/named-input/map-input-name variable. The xformbin action uses only inputs that are specified by these variables. The xformbin action does not use value of the Input field. To use dynamic inputs, create a setvar action that defines each input variable using the var://local/named-input/map-input-name variable. v In the Variable Name field, the name for the map-input-name portion of the variable must be the same as a cardname that is identified in the map file. Chapter 38. Reference objects for service objects 705
v In the Variable Value field, specify the value for the variable. The value identifies a context on the DataPower appliance that contains the named input.It is necessary to populate the contexts that are named in the variables with the data to be transformed. Use either a Fetch action or a Transform that uses a custom style sheet. For example, the original submission from the client contains attachments. The Binary Transform must use the data in the attachments, not the root part of the message. To put the data from an attachment into a context, use a fetch action to retrieve the data from
Based upon this information, one could rule out both A and B, leaving C and D as reasonable options. After reading through the documentation and the question itself, I believe the correct answer would be C. D specifically notes that the variable is local. Looking through the documentation does in fact reveal a local variable that is set, but I don't believe it is the proper variable that needs to be configured for the configuration to work. Any comments towards my theory are more than welcome.
