Each square in a $3 \times 3$ grid is randomly filled with one of the $4$ gray and white tiles shown below on the right. 
[asy] size(5.663333333cm); draw((0,0)--(3,0)--(3,3)--(0,3)--cycle,gray); draw((1,0)--(1,3)--(2,3)--(2,0),gray); draw((0,1)--(3,1)--(3,2)--(0,2),gray);  fill((6,.33)--(7,.33)--(7,1.33)--cycle,mediumgray); draw((6,.33)--(7,.33)--(7,1.33)--(6,1.33)--cycle,gray); fill((6,1.67)--(7,2.67)--(6,2.67)--cycle,mediumgray); draw((6,1.67)--(7,1.67)--(7,2.67)--(6,2.67)--cycle,gray); fill((7.33,.33)--(8.33,.33)--(7.33,1.33)--cycle,mediumgray); draw((7.33,.33)--(8.33,.33)--(8.33,1.33)--(7.33,1.33)--cycle,gray); fill((8.33,1.67)--(8.33,2.67)--(7.33,2.67)--cycle,mediumgray); draw((7.33,1.67)--(8.33,1.67)--(8.33,2.67)--(7.33,2.67)--cycle,gray); [/asy]
What is the probability that the tiling will contain a large gray diamond in one of the smaller $2 \times 2$ grids? Below is an example of such tiling. 
[asy] size(2cm);  fill((1,0)--(0,1)--(0,2)--(1,1)--cycle,mediumgray); fill((2,0)--(3,1)--(2,2)--(1,1)--cycle,mediumgray); fill((1,2)--(1,3)--(0,3)--cycle,mediumgray); fill((1,2)--(2,2)--(2,3)--cycle,mediumgray); fill((3,2)--(3,3)--(2,3)--cycle,mediumgray);  draw((0,0)--(3,0)--(3,3)--(0,3)--cycle,gray); draw((1,0)--(1,3)--(2,3)--(2,0),gray); draw((0,1)--(3,1)--(3,2)--(0,2),gray); [/asy]
$\textbf{(A) } \frac{1}{1024} \qquad \textbf{(B) } \frac{1}{256} \qquad \textbf{(C) } \frac{1}{64} \qquad \textbf{(D) } \frac{1}{16} \qquad \textbf{(E) } \frac{1}{4}$
There are $4$ cases that the tiling will contain a large gray diamond in one of the smaller $2 \times 2$ grids, as shown below:
[asy] size(375);  fill((1,1)--(2,2)--(1,3)--(0,2)--cycle,mediumgray); draw((0,0)--(3,0)--(3,3)--(0,3)--cycle,gray); draw((1,0)--(1,3)--(2,3)--(2,0),gray); draw((0,1)--(3,1)--(3,2)--(0,2),gray);  fill(shift(7,0)*((1,1)--(2,2)--(1,3)--(0,2)--cycle),mediumgray); draw(shift(6,0)*((0,0)--(3,0)--(3,3)--(0,3)--cycle),gray); draw(shift(6,0)*((1,0)--(1,3)--(2,3)--(2,0)),gray); draw(shift(6,0)*((0,1)--(3,1)--(3,2)--(0,2)),gray);  fill(shift(12,-1)*((1,1)--(2,2)--(1,3)--(0,2)--cycle),mediumgray); draw(shift(12,0)*((0,0)--(3,0)--(3,3)--(0,3)--cycle),gray); draw(shift(12,0)*((1,0)--(1,3)--(2,3)--(2,0)),gray); draw(shift(12,0)*((0,1)--(3,1)--(3,2)--(0,2)),gray);  fill(shift(19,-1)*((1,1)--(2,2)--(1,3)--(0,2)--cycle),mediumgray); draw(shift(18,0)*((0,0)--(3,0)--(3,3)--(0,3)--cycle),gray); draw(shift(18,0)*((1,0)--(1,3)--(2,3)--(2,0)),gray); draw(shift(18,0)*((0,1)--(3,1)--(3,2)--(0,2)),gray); [/asy]
There are $4^5$ ways to decide the $5$ white squares for each case, and the cases do not have any overlap.
So, the requested probability is \[\frac{4\cdot4^5}{4^9} = \frac{4^6}{4^9} = \frac{1}{4^3} = \boxed{\textbf{(C) } \frac{1}{64}}.\]
~apex304, TaeKim, MRENTHUSIASM