The principle bars a spouse from giving evidence in court about a communication made between the spouses during the marriage, unless the spouse who made that communication consents. X, Y's wife, saw Y coming out of the neighbour's house early in the morning, and Y then told her that he had murdered the neighbour and gave her the neighbour's jewellery.
Since the principle only protects what passed between the spouses as a communication, X's testimony is limited accordingly, she can describe what she personally saw but not what Y confided to her.
Therefore, the correct answer is X is not allowed to appear as a witness to depose what was told by the husband to her, however, she can depose what she saw.
The fact that decides this question is the difference between two categories of information in X's knowledge, what she personally saw, Y leaving the neighbour's house at 6 am, and what Y later told her, that he had committed the murder. The principle only protects the second category, so each option can be tested against whether it respects that split.
Since the principle protects only marital communications and not independent observations, the option that draws that exact line is the one that fits.
Therefore, the correct answer is X is not allowed to appear as a witness to depose what was told by the husband to her, however, she can depose what she saw.