[I had temporarily removed this post, but I'll put it back now. I'll be sure specify what I'm uncertain about.]
Hello Yoonique,
Wow. What a thought provoking problem, and good insight on your part!

I think you have a very strong case to argue that "Case 2" is correct.
We
could analyze the "mini-collision" regarding the first moment the block hits the slope, at the tip of the slope where the slope meets the ground. (Although I don't recommend going into detail for reasons which might become clear later.)
- Clearly, the momentum of the system before this "mini-collision" is simply mv, and is completely in the horizontal direction. Since the surface of the ground is frictionless, no horizontal momentum is imparted to the Earth, and thus the initial, horizontal component must remain the horizontal momentum of the block + slope throughout -- even at the moment immediately after the "mini-collision."
- If immediately after this "mini-collision," the block's horizontal momentum is less than mv [such as mvcos(<something>)], the block must have imparted some horizontal momentum to the slope. It means that immediately after this mini collision, the slope's horizontal velocity is not zero. Furthermore, the angle at which the block moves up, relative to the ground, is not going to be θ (the angle of the slope) since the slope is moving too. This aspect could get complicated.
- The momentum in the vertical direction gets really hairy for this "mini-collision" and even afterwards, since we would ultimately need to take the momentum of the Earth into consideration, or at least model it with external, time varying impulses. This gets hairy.
A different approach is to model the entire problem as one big collision. The initial state is the block is moving horizontally with momentum
mv, the the final state is the slope+block are moving together, completely in the horizontal direction, with the block sitting atop the slope. And as usual, momentum is conserved. This way we don't need to muck about with the nasty intermediate steps.
On the surface, this appears to be a completely inelastic collision. If you can make the argument that the all the extra energy of the collision goes into the gravitational potential energy of the block (which, in the end, rests atop the slope), then this should be a pretty easy problem to solve.
[Edit: is this argument valid? Even with frictionless surfaces, can we say for sure for sure that there are no losses to non-conservative forces? That's the crux of the argument.]
(If the argument holds, the implications are that your given answer of v
min = √[(2gh)(M+m)/(M+msinθ)]* is incorrect, and the answer is not even dependent on the angle
θ.)
*(Even though your given answer may be wrong, are you sure you typed that in correctly? The way I solved it [using the assumptions in "Case 1"], there was a +/- sign difference in there somewhere, and something else needs to be squared.)