He garnishes his sundae with Kahlua rather than with chocolate syrup.
He garnishes his sundae with Kahlua instead of with chocolate syrup.
He garnishes his sundae with Kahlua rather than with chocolate syrup.
He garnishes his sundae with Kahlua instead of with chocolate syrup.
The structure "A instead of B" could only be used to put nouns in parallel, and the GMAT doesn't appear to use this structure even for that. The structure "A rather than B" can put two of any grammatical form in parallel. Here, we are putting prepositional phrases beginning with "with" in parallel, so we need to use "rather than."