The correct answer is "1 and 2 only." Wood's Dispatch of 1854 was a landmark document in the development of education in India, emphasizing the need for a systematic approach to education and recommending the introduction of the grants-in-aid system for schools. It also called for the establishment of universities in major cities to promote higher education. However, while it encouraged English education, it did not mandate English as the medium of instruction at all levels, but rather suggested the teaching of English as an important subject. This context highlights Wood's Dispatch's pivotal role in shaping educational policies in colonial India, influencing later reforms and the structure of the education system, which is crucial for understanding India's educational evolution in the UPSC framework.