 Solution

Let $h:Y\to \mathbb{R}$ be continuous, without a boundedness assumption. The homeomorphism $\theta (t)=t/(1+|t|)$ maps the real line onto $(-1,1)$, with inverse ${\theta }^{-1}(s)=s/(1-|s|)$. The bounded function $g=\theta \circ h$ extends by the preceding bounded construction to a continuous real-valued $G$ on $X$. Since $|G|<1$ on $Y$, the strict-range modification gives a continuous $\tilde{G}$ with range in $(-1,1)$ and the same restriction to $Y$. Thereforeis continuous everywhere: its denominator is pointwise positive. On $Y$ it equals ${\theta }^{-1}(\theta (h))=h$. Thus $Y$ is $C$-embedded. It is important to modify the extension before applying the inverse: an extension allowed to attain $1$ or $-1$ outside $Y$ would make this formula undefined there.