C. You need to configure the Auto Scaling group's create_before_destroy meta-parameter.

The issue described typically occurs because Terraform, by default, attempts to update the Auto Scaling group and its associated Launch Configuration in parallel, which can lead to conflicts and scaling issues when replacing the Launch Configuration.

To address this issue, you can use the create_before_destroy lifecycle block within your Auto Scaling group resource configuration. This block tells Terraform to create a new resource before destroying the old one when making changes. By creating the new Launch Configuration first, you ensure that the Auto Scaling group scales using the updated Launch Configuration as expected.

Option C is the correct solution for resolving this issue.