How do Mr. Connolly's and Lily's opinions differ about
Margaret riding in the land race?
Lily is nervous about Margaret riding, but Mr. Connolly
thinks she is able to do it.
Lily is confident that Margaret can ride, but Mr. Connolly
disagrees because she is a girl.
Lily is against Margaret riding, but Mr. Connolly thinks
she should ride with her brother.
Lily is sure that Margaret can ride, but Mr. Connolly
disagrees because she is too young.

Lily is confident that Margaret can ride, but Mr. Connolly  disagrees because she is a girl.

Explanation:

From the given passage from "Demon's Run", we can know from the conversation between the characters that Margaret will be the one "who will race for a claim and then wait for the others". Mr. Connolly had presumed Benjamin will be the one, but rather, he was told that Margaret will be the runner.

When Mrs. Connolly exclaimed "Margaret?", we can infer that she was surprised to hear it'll be a girl who'll be the runner. Mr. Connolly's implication that "she can’t go riding out there with all those rough men" implies that he too finds it shocking to hear of a girl racing among the men. With Lily's confident assurance of Margaret being "the better rider", we can safely say that Lily's confidence in Margaret's ability is different from Mr. Connolly's belief that she can't as she's a girl.

Thus, the correct answer is the second option.

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