For question 1, "What does Diana Dabby's
'chaotic variation' scheme do?"

It maps a piece of music onto a chaotic
attractor and uses that mapping

to generate variations on that piece.

So the second answer is correct.

For question 2, "Chaotic variations on 
dance sequences that are generated by

Josh Stuart's chaotic variation scheme
look exactly like the originals."

This is false. They look very similar to,
but not exactly the same as,

the original dance pieces.