"The small village has twenty-eight houses."
Translation:Das kleine Dorf hat achtundzwanzig Häuser.
Because the adjective is in front of a noun (it's an attributive adjective), it has to have an ending -- klein is the only form it cannot be.
Which ending to choose depends on what is in front of it (here: the definite article das, so you need weak inflection) and the gender, number, and case of the following noun (here: neuter nominative singular).
Why is "Das kleine Dorf hat 28 Häuser" a suggested solution for multiple choice if it's refused?
That should be accepted. Next time, check that there isn't a small error in the sentence (there are often some with intentionally-wrong but similar-looking words), and report it if there's a problem.