For the Challenege: Data Security> Control Access to the Org I am not seeing Salesforce show up as a license option and yes i connected a developer org.

Hi , 

Your Trailhead Playground comes with (2) full Salesforce licenses. If you've already used up both licenses and you try to create the new System Administrator user, it will look like this: 

Profiles other than admins also use Salesforce licenses.

If you do not find the "Salesforce" license in the drop-down, please check for the other user who's active with that license and deactivate them, please follow the below steps to deactivate. 

Goto setup--> users-->click view users drop down and then select "Active users" option.  

Here you can find the list of active users. Please deactivate the "salesforce" license user.

NOTE: Salesforce License can be assigned to other Profiles too, hence please check out all your active user who has Salesforce license and then proceed accordingly.