Probably a silly question; but how come H2SO4 doesn't dehydrate it to form a diene or hydrate it to form a diol?
I don't think this is silly at all. It is right on target. Alcohol and ether oxygen atoms are more basic than an alkene. I presume that is why it is difficult to hydrate very weakly activated alkenes, e.g., ethylene and propene. It is easier to add acetic acid to an alkene as the acetate product is less basic.
I was reluctant to suggest an answer for this question as I found it difficult to predict all that would happen. Two products or is it suggest two products that would have a MF of C7H14O? I surmise this is a hypothetical problem as the acid catalyzed addition of water to propene is difficult and in this example, it also has a monosubstituted alkene.
The two products expected are probably the diastereomers of the 2,6-dimethyloxane, cis and trans. I predict if this reaction were performed in the lab, the tetrahydrofurans would also be present.