I see two possible ways to distribute this.
I believe it is case 1.
For brevity,
Let \begin{align}A &= (\neg P \lor Q) & B &= (P \lor \neg Q) & C &=(\neg R \lor Q) & D &=(R \lor \neg Q). \end{align}
Case 1:
$$(\neg P \lor R) \land [(A\land B)\lor (C\land D)]=$$
$$[(\neg P\land A \land B)\lor(\neg P \land C \land D)]\lor [(R \land A \land B)\lor (R \land C \land D)]$$
Case 2:
$$(\neg P \lor R)\land [(A \land B)\lor (C\land D)]=$$
$$[(\neg P \lor A) \land (\neg P \land B)\lor(\neg \land C)∧(\neg \land D]\lor [(R \land A)\land (R \land B)) \lor (R \land C) \land (R \land D)]$$
Question: Which case is correct (if either)? Why is this case correct/other wrong?
Case 1 is correct.
What you end up with in case 2 is ungrammatical ... you'll need to add some parentheses. I assume you meant:
$$[\color{red}((\neg P \color{red}\land A) \land (\neg P \land B)\color{red})\lor\color{red}((\neg \land C)∧(\neg \land D\color{red})\color{red})]\lor [\color{red}((R \land A)\land (R \land B)) \lor \color{red}((R \land C) \land (R \land D)\color{red})]$$
But note that that is equivalent to:
$$[((\neg P \land A) \land (\neg P \land B))\lor((\neg \land C)\land(\neg \land D))]\lor [((R \land A)\land (R \land B)) \lor ((R \land C) \land (R \land D))] \overset{Association \ (drop \ parentheses \ in \ generalized \ conjunctions)}\Leftrightarrow$$
$$[(\neg P \land A \land \neg P \land B)\lor(\neg \land C\land \neg \land D)]\lor [(R \land A\land R \land B) \lor (R \land C \land R \land D)] \overset{Commutation}\Leftrightarrow$$
$$[(\neg P \land \neg P \land A \land B)\lor(\neg \land \neg \land C \land D)]\lor [(R \land R \land A \land B) \lor (R \land R \land C \land D)] \overset{Idempotence}\Leftrightarrow$$
$$[(\neg P \land A \land B)\lor(\neg \land C \land D)]\lor [(R \land A \land B) \lor (R \land C \land D)]$$
... which is exactly what you got from case 1
In other words, had you used proper parentheses, both results would have been correct!
That said, I have a feeling you did the following to get to case 2:
$$(\neg P \lor R) \land [(A\land B)\lor (C\land D)]=$$
$$[(\neg P \land ((A\land B)\lor (C\land D))] \lor [(R \land ((A\land B)\lor (C\land D))]=$$
$$[(\neg P \land (A\land B)) \lor (\neg P \land (C\land D))] \lor [(R \land (A\land B))\lor (R \land (C\land D))]=$$
$$[(\neg P \land A) \land (\neg P \land B)) \lor (\neg P \land C) \land (\neg P \land D))] \lor [(R \land A) \land (R \land B))\lor (R \land C) \land (R \land D))]$$
That is, you acted as if that last step was a Distribution ... but it isn't! ... because you end up distributing a $\land$ over a $\land$. Distribution is $\land$ over $\lor$ or vice versa.
So, you should have just stopped 1 line earlier, and thus have ended up with
$$[(\neg P \land (A\land B)) \lor (\neg P \land (C\land D))] \lor [(R \land (A\land B))\lor (R \land (C\land D))]$$
but since $\land$ is Associative you can drop some parantheses and thus get:
$$[(\neg P \land A \land B)\lor(\neg \land C \land D)]\lor [(R \land A \land B) \lor (R \land C \land D)]$$
and since $\lor$ is Associative you can drop those square brackets as well:
$$(\neg P \land A \land B)\lor(\neg \land C \land D)\lor (R \land A \land B) \lor (R \land C \land D)$$