The answer couldn’t be “(D) confused with”; it’s “(A) No change.” There’s really no rule requiring parallelism for grammatically different “or” elements in a “when”-clause. In this particular case, the first element is the adjective “confused,” while the other element, “waiting for a signal from its owner,” is a verb phrase in the progressive form”—elements that are mutually exclusive. If the preposition “with” is added to the phrase “the dog is confused,” the sentence would require an object of the preposition that isn’t there or isn‘t grammatically called for. We must keep in mind that in this particular subordinate clause construction; the idea in “the dog is confused” is complete in itself, independent of the idea in the “or” phrase that follows it, “waiting for a signal from its owner.”
Perhaps the logic of this explanation would become clearer if we restate the original sentence this way: “Its forehead, for example, may wrinkle when the dog is confused or when the dog is waiting for a signal from its owner. Here, we have two mutually exclusive “when”-clauses, “when the dog is confused” and “when the dog is waiting for a signal from its owner.” Clearly, when these two clauses are compounded into “when the dog is confused or waiting for a signal from its owner,” there’s absolutely no room for the preposition “with” anywhere in that compound construction.
