The observatory's oldest telescope, ______ has been in continuous use since 1932, still produces images sharp enough for undergraduate…

"Which has been in continuous use since 1932" is a supplement: it adds extra information about the telescope without narrowing down which telescope is meant, since "the observatory's oldest telescope" already identifies it uniquely. A supplement needs a matching pair of commas, and the closing comma is already visible right after "1932." D supplies the missing opening comma. A leaves the opening comma out entirely. C swaps in that, which conventionally introduces restrictive (non-supplemental) information and doesn't take a comma at all, creating a mismatch with the comma already present. B adds an unnecessary coordinating word that has nothing to connect to, since this is a single supplement, not a second item in a list.