There problem here and with other similarly relatively obscure/complex translations is that Duolingo gives us lots of stupidly simple phrases like "I have the wool" and just occasionally hits with something more complex like this without really giving us enough preparation or training. It's getting annoying.
Though I also messed it up, I think I have figured out the reason. Sentire can mean any kind of "sense", i.e. hear, smell or feel. But it must be transitive, it needs a subject. In this version ci is a subject, so we hear/smell/feel each other. Now the other version is sentirsi, which only means feel. Then ci indicates the reflexive.
"Meglio" by itself means "better." "Best" would be "il meglio". http://en.wikibooks.org/wiki/Italian/Comparatives_and_superlatives
Something strange here. The first option by DL is "Where can we hear each other better?". I wrote "Where can we hear better?", and dumped. The second option by DL is, "Where can we feel better?" So! What happened to "each other"? Why not "Where can we feel each other better?" Surely not because of modesty?