You need to have a quite from the poem
I believe C is your answer because I read it, just for a second and looked away and had to look back. There is a dangling modifier in C because it implies that the rabbit is "driving along the highway" when it (hopefully!) isn't. :)
The "inward eye" refers to the mind recalling an image. He's saying that while he lays on his couch he sees the daffodils in his mind; using his memory of what he had seen.
What are you reading? And what part of the reading?