Iodine in grignard reaction

My guess would be either to increase the surface area or react with the surface of Mg which allows the inner part to react in the grignard reaction (Something similar to removing rust on metals)

the magnesium oxide layer is pretty impervious

If the correct answer is c, how do you think iodine could activate the magnesium?

Yes, thats right. The magnesium then can start to react with the halide. This is not always nessesary but speeds things up.