The correctly punctuated absolute phrase is A. , her house bedecked in garlands of flowers,
Absolute phrases modify a noun or noun phrase, but they are not connected to it by a conjunction. They are simply connected by a comma. Furthermore, they can be removed from the sentence without changing its grammaticality or meaning.
Consider:
Señora Alvarez, her house bedecked in garlands of flowers, waited excitedly for her guests to arrive.
Señora Alvarez waited excitedly for her guests to arrive.
The meaning in both sentences is the same. A woman is waiting for her guests.