Why can't we use "tiu" in this sentence? I thought that "tiu" refers to something specific.
If this is the first sentence you define it here and can refer to it by tiu from now on. If the rule has been defined before it is better to refer to it by tiu already in this sentence.
Tio is usually for something abstract. Possibly, an idea or something not previously mentioned.
Tiu is usually for when the object has either been mentioned before or it is sort of 'right there'. This is probably going to be used more often.
Since it ends in "ulo" doesn't "regulo" mean "rule-person"?
That’s part of the language humour of Esperanto that you can read some words in two ways; here: reg-ulo or regul/o.
Famous example: Kial ĝirafo neniam estas sola? – Ĉar ĝi havas kolegon.
Here you can read it as koleg/o (colleague) or kol-ego (long neck).
"Nur estas tio generala regulo" was rejected - I don't understand why, I though verb, subject amd object could be placed in any order in Esperanto?
Word order does often matter also nur was the wrong word
The English here sounds a little awkward to me. Would it still be correct to translate this as "That is simply a general rule." ?
Sounds good to me, but you should report it when you think you are right and they will make the course better if they agree.
"That is simply a general rule." is accepted.