Understanding involves knowing something about the context. This includes general biographical context: who is the author, and what are, in general, his views. And also knowing something about the specific context of the excerpt: What is the subject of the containing essay, how does the excerpt fit within the author's argument, how it is supposed to help the author's purpose.
Bertrand Russell, the author of the present excerpt, was a very clear writer. Still, he does present a certain peculiar problem for interpretation in that he changed his views quite a few times during his philosophical career. So when one reads a passage of Russell's, one has to dig in a bit, to find out what were Russell's views at the particular moment. So even though I've read Russell in the past, I also looked up the particular essay ( On the Nature of Acquaintance: Neutral Monism (1914) ) in order to look at the specific context of the passage.
This article discusses and criticizes Neutral Monism, a metaphysical theory of the American philosopher and psychologist William James. The theory was, briefly , that what we directly experience is neither material nor mental, but a "neutral stuff". And that both mind and matter are ultimately made of that "neutral stuff".
As to your specific questions:
The antecedent of (the demonstrative pronoun) this is "that there is an entity answering a certain description".
a. Sensing an object, for example a tree, is a passive experience. Judging or believing that the tree exists is a further, active step. That is the primary difference between hallucination and error. Hallucination, like sensing a pink elephant, is a passive experience. Only if I added the active judgement that the pink elephant that I sensed really existed, I would be in error.
b. The last word of your excerpt that you greyed, the word it, refers to the hallucination from the preceding sentence.
c. Russell does present a supporting argument, not inside the quoted passage itself, but right after it in the essay. Briefly, the argument is that if belief consisted just in experiencing something passively, whether I acted or not, a contradiction would result in the case where the belief was false.
d. If a rational person is hallucinating then, in general, if she is unaware of being hallucinated, she will judge that what she senses (say, a pink elephant) really exists. But if she suspects an hallucination, she will withhold judgement.
- Lack of experience in philosophy does limit one's ability to understand a passage such as this by oneself. Some knowledge of the context is needed in order to read between these lines. The stage of inexperience is, however, inevitable for everyone, and it is not a reason to quit. I'd recommend reading introductory books, alongside thinking and discussing philosophy with others. Also there are philosophers that are both intriguing and relatively easy to read, such as Plato and Descartes.