Hi mN2mmvf,
"Refute" is already an academic word without a looser, colloquial meaning, so there's no need to limit its definition further. "Refute" just means to prove wrong, deny, or contradict. Also, having the
purpose of refuting does not mean the person fully succeeds, so your concern about whether the author was able to fully refute the continuity hypothesis isn't something to be concerned with. The question is about the author's purpose, not how successful he or she is.
Your other disagreement with the answer choice is more important to refute.
Your description of the continuous change hypothesis is a little too general to be useful. What do the continuous change scholars actually argue?
Lines 10-15 state that
proponents of the "continuous change" hypothesis believe that United States federal law had a marginal impact...
This directly conflicts with the authors assertion that the anti-discrimination laws had an important impact.
The structure of the passage also shows that the author's main purpose is to argue against the continuous change hypothesis. A hypothetical passage that answer choice (A) would match with might discuss how a particular theory correctly explained some phenomenon but point out how it was unable to explain something else. That hypothetical author's purpose would be to show that the theory was incomplete, rather than just to refute it.