1. Riverbed SteelCentral Portal User's Guide, Version 4.8, Chapter 6: "Application models," Section: "Application model components," Page 127. The guide states: "Internal elements are the application instances that are part of the application model. For example, you can add a specific HTTP server as an internal element." This directly supports that an Internal Element is an application instance.
2. Riverbed SteelCentral Portal User's Guide, Version 4.8, Chapter 6: "Application models," Section: "Application model components," Page 127. The guide defines a Tier as: "Tiers are logical groupings of servers in an application model." This confirms that a logical set of hosts (Option D) is a Tier, not an Internal Element.