In Azure AD, assigning directory roles to a group requires creating a role-assignable group. The SC-300 study materials and the official exam reference emphasize that the group must be a Security group and created with the isAssignableToRole capability. Microsoft's guidance states: "Only security groups can be assigned Azure AD roles. Microsoft 365 groups are not supported." It also clarifies membership constraints: "Dynamic membership is not supported for role-assignable groups." Because you intend to assign Azure AD roles to Group1 and also add User1 and User2 directly, the acceptable configuration is a Security group with Assigned membership. This allows you to explicitly add the two users and later attach an Azure AD role to the group via PIM or standard role assignment. Options using Microsoft 365 groups (A, E) are invalid for role assignment, and options using Dynamic membership (A, B, C) are not permitted for role-assignable groups.
Therefore, the only configuration that satisfies both adding the users and assigning Azure AD roles is Security
+ Assigned (Option D).