C: observers tended to disregard the random assignment to argue a
    certain position and identified the debaters' true attitudes to be
    those they expressed during the debate

    Correct.
In section, group 1 was assigned to argue that the prison study was ethical, group 2 was assigned to argue that the prison study was unethical and the class was given the task of observing the debate to ascertain what the members of groups 1 and 2 true attitudes were.  In this demonstration, the observer group (in this case, the class) committed the fundamental attribution error, which is overestimating dispositional causes (e.g., a person in group 1 believes the Stanford Prison Study was ethical) of a behavior, and underestimating situational causes (e.g., a person in group 1 was assigned to argue the Stanford Prison Study was ethical).  Since the members in the observer group (the class) did commit this error, answer C is correct.