Correct Answer: D
To prevent packets from being forwarded beyond the service provider domain when the Label Switched Path (LSP) is down, the engineer must configure a private IP address as the destination address of the headend router of Cisco MPLS Traffic Engineering (TE). This ensures that if the LSP fails, the packets will not be routable over the public internet, thus containing them within the service provider's network.
References := Implementing and Operating Cisco Service Provider Network Core Technologies (SPCOR) documentation provides guidelines on MPLS TE configuration, including the use of private IP addresses for headend routers to maintain traffic within the service provider domain. This practice is aligned with the principles of traffic engineering and network containment for service providers.