Lo is required if the direct object is not a noun. "todo" is used as an adjective or a pronoun in Spanish and cannot be a direct object by itself.
I translated it as "You tell it all to me." which is a more direct translation, but does mean the same as "You tell me everything." which is more commonly said in English. Of course, DuoLingo did not accept it, but I reported it as also correct though less common.
That would be "Me lo dices todo."
"lo" is the direct object pronoun which replaces the noun when it is not in the sentence. Usually, todo is by itself used in the nominative case (subject, predicate nominative) or as the object of a preposition, but usually "lo" is used with it when it is the direct object. "lo sabes todo." , "se lo comió todo", etc. http://dictionnaire.reverso.net/espagnol-anglais/dices http://dictionnaire.reverso.net/espagnol-anglais/todo http://www.studyspanish.com/lessons/iodopro.htm
Maybe a native Spanish speaker could step in and let us know if lo is dropped in casual talk? I know "lo" is required even for a noun if the direct object is at the beginning of the sentence. http://spanish.about.com/od/usingparticularverbs/a/gustar_a.htm