I saw on artofproblemsolving that problem 38 helps you solve this one, and that british flag theorem is of help here.
After reading those clues I came up with this method:
From the corner of each square connect a line to the centre of the circle. Connect a line from centre to point of contact between circle and tangent, note the 90 degree angle between tangent and this radius. Now express the lines that go from corner of square to centre in terms of radius, r, and the "known length". Example, when considering the top left corner, sqrt(2) is known length. Using the British flag theorem this yields:

Which gives B.
Never wouldve come up with this if i didn't know problem 38 nor the british flag theorem, hence this was more of a 'needle in a haystack' kind of problem which i don't find as 'cute' as some of your other problems. Or maybe I'm just not clever enough