$\begin{align}x^4-3x^2+2x^2y^2-3y^2+y^4+2&=0\\ \Rightarrow x^4+2x^2y^2+y^4-3(x^2+y^2)+2&=0\\ \Rightarrow (x^2+y^2)^2-3(x^2+y^2)+2&=0\\ \Rightarrow A^2-3A+2&=0 ~; ~[\mathrm{Let~}A=x^2+y^2] \\ \Rightarrow (A-1)(A-2)&=0 \\ \Rightarrow A&=1,2 \end{align}$
$\therefore x^2+y^2=1$ or $x^2+y^2=2$. So there are two circles with different radii.
So the correct answer is C.