My word for word translation of "Du liest wohl." as "You read well." was accepted but I don't understand how the alternative above can be.
These are two different meanings of the word 'wohl' (It has many). In one case it's an adverb, in the other a particle. See here for the 'seem to' meaning: http://www.duden.de/rechtschreibung/wohl_vermutlich_doch and here for the 'well' meaning: http://www.duden.de/rechtschreibung/wohl_gut_besser_durchaus
Fine link. Pons No.5 (wohl=vermutlich) is the one and only meaning of "Du liest wohl?" = "I suppose you are reading?" - a sentence that would come in with a question mark more often than not. For saying "You read well" the word "wohl" does not work - you have to use "gut" instead: "Du liest gut" - DL should not accept "You read well" as a translation of "Du liest wohl" - that's just completely wrong.
I have most often heard this use of wohl to be an assertion following a negative claim and here would have the emphasis on 'liest', something like: "Ich habe keine freie Zeit mehr." "Du liest wohl!"
Is this wrong?