The unit square's diagonal has a length of $\sqrt{0.2^2 + 1.4^2} = \sqrt{2}$. Because $S$ square is not parallel to the axis, the two points must be adjacent.
Now consider the unit square $U$ with vertices $(0,0), (1,0), (1,1)$ and $(0,1)$. Let us first consider only two vertices, $(0,0)$ and $(1,0)$. We want to find the area of the region within $U$ that the point $v=(x,y)$ will create the translation of $S$, $T(v)$ such that it covers both $(0,0)$ and $(1,0)$. By symmetry, there will be three equal regions that cover the other pairs of adjacent vertices.
For $T(v)$ to contain the point $(0,0)$, $v$ must be inside square $S$. Similarly, for $T(v)$ to contain the point $(1,0)$, $v$ must be inside a translated square $S$ with center at $(1,0)$, which we will call $S'$. Therefore, the area we seek is Area$(U \cap S \cap S')$.
To calculate the area, we notice that Area$(U \cap S \cap S') = \frac{1}{2} \cdot$ Area$(S \cap S')$ by symmetry. Let $S_1 = (0.1, 0.7), S_2 = (0.7, -0.1), S'_1 = (1.1, 0.7), S'_2 = (0.3, 0.1)$. Let $M = (0.7, 0.4)$ be the midpoint of $S'_1S'_2$, and $N = (0.7, 0.7)$ along the line $S_1S'_1$. Let $I$ be the intersection of $S$ and $S'$ within $U$, and $J$ be the intersection of $S$ and $S'$ outside $U$. Therefore, the area we seek is $\frac{1}{2} \cdot$ Area$(S \cap S') = \frac{1}{2} [IS'_2JS_2]$. Because $S_2, M, N$ all have $x$ coordinate $0.7$, they are collinear. Noting that the side length of $S$ and $S'$ is $1$ (as shown above), we also see that $S_2M = MS'_1 = 0.5$, so $\triangle{S'_1NM} \cong \triangle{S_2IM}$. If follows that $IS_2 = NS'_1 = 1.1 - 0.7 = 0.4$ and $IS'_2 = MS'_2 - MI = MS'_2 - MN = 0.5 - 0.3 = 0.2$. Therefore, the area is $\frac{1}{2} \cdot$ Area$(S \cap S') = \frac{1}{2} [IS'_2JS_2] = \frac{1}{2} \cdot 0.2 \cdot 0.4 = 0.04$.
Because there are three other regions in the unit square $U$ that we need to count, the total area of $v$ within $U$ such that $T(v)$ contains two adjacent lattice points is $0.04 \cdot 4 = 0.16$.
By periodicity, this probability is the same for all $0 \le x \le 2012$ and $0 \le y \le 2012$. Therefore, the answer is $0.16 = \boxed{\frac{4}{25} \textbf{(C)} }$
Let $S$ be the square one of whose diagonals has endpoints $(1/10,7/10)$ and $(-1/10,-7/10)$.  A point $v=(x,y)$ is chosen uniformly at random over all pairs of real numbers $x$ and $y$ such that $0 \le x \le 2012$ and $0\le y\le 2012$.  Let $T(v)$ be a translated copy of $S$ centered at $v$.  What is the probability that the square region determined by $T(v)$ contains exactly two points with integer coefficients in its interior?
$\textbf{(A)}\ \frac{1}{8}\qquad\textbf{(B) }\frac{7}{50}\qquad\textbf{(C) }\frac{4}{25}\qquad\textbf{(D) }\frac{1}{4}\qquad\textbf{(E) }\frac{8}{25}$