This is a textbook case of correlation/causation problems. We're asked to identify the flaw so let's look at the argument core.
Two premises here:
People with personality disorders have more theta waves + Amount of theta waves increase while watching TV ---> Watching too much TV increases one's risk of developing personality disorders
This argument is an example of implied causation. They don't use the word "cause" but they say that watching TV will increase your risk of developing personality disorders. There are at least three ways to look at the same flaw (correlation/causation) with this reasoning.
1) Something else could be causing both (diet, lack of exercise)
2) Causation could go the other way (people with personality disorders also watch TV and that explains their high theta counts)
3) Or, an even more obvious problem: the argument says theta counts increase while watching TV. They might just drop back to normal levels when you turn the set off (whereas the personality disorder people have some different problem that's causing their elevated theta levels.
Any way you look at it, there is some very weak correlation here and they've used it to get to causation. You get that in (C). These are very different concepts and it's essentially impossible to use correlation to prove causation (at least on the LSAT).
(A) won't work. Personality disorder means the same thing throughout: some kind of mental disease.
(B) is true but irrelevant. You don't have to define theta waves to make an argument about them.
(D) might look tempting. But they don't tell us anything about the data. On the LSAT, we take all the premises to be true so we have no reason to doubt the representativeness of the data.
(E) is exactly the opposite of what they do. They assume that the causal arrow goes the other way: TV causes the personality disorders. If it went the other way around, their argument would completely fall apart.
If you've still got a question after reading this, post away!
Demetri