My sister who has no US status and need to get a tax ID, I myself am a US citizen and the parents are green card holders. I submitted form W7 for her and chose "dependent of US citizen" as reason for applying but it was rejected with reason "did not attach US federal tax return".
My question is,
Which option (a-h) should she choose and they won't ask for additional info to be attached?
Thanks in advance.

IS your sister in the US?
If she qualifies as your dependent (she must be a US citizen/resident/resident alien or resident of Canada or Mexico), you send the W7 together with your tax return to the address written in the instructions for from W7.
You need to attach the information asked for. A notarized copy of her passport (if she is not in the US, it needs to have an Apostille as well) is the only standalone identification.

Being a resident/citizen is of course only one of he requirements to qualify as a dependent. Ar eyou claiming her or your parents?

#1 When I attach my federal tax return this time, do I need to send the notarized copy of her passpport and W7 again like applying brand new or just send the missing documents as case is pending?
#2 If my sister is not a resident but I want to get her a tax ID, which option I should pick for her that won't require any additional documents expect the notarized copy of her passport?

Yes, you have to attach the notarized copy again.
If she qualifies as your dependent, choose dependent of US citizen. Note that illegal immigrants passing the SPT are resident aliens for tax purposes. If she is not a resident (alien) or resident of Mexico or Canada she would not qualify as a dependent. And if she does not have to file atax return of her own, I doubt she would get an ITIN.