"It seems that they see better with their new glasses."
Translation:Il semble qu'elles voient mieux avec leurs nouvelles lunettes.
The exercise accepts (for months) answers with ils and elles. So the most likely reason was that your answer contained a mistake (a typo for instance, so that you may not have seen). Of course, your choice of ils was not the mistake in your answer.
If Duo grades your answer as wrong then Duo's algorithm pick one possible answer among all the defined ones.
This answer may or may not fit your choice between ils and elles.
If the answer shown to you is with elles but you answered with ils, it doesn't imply that your choice of ils was the reason why your answer was graded wrong in the first place.
Is this 'voient' indicative or subjunctive? Or could either mood be used here?
The tense you use after “il semble que” depends on what you want to say. If you state a fact, use indicative present. If you state a possibility, use the subjunctive present.
In this particular sentence and out of any context, both are valid. Luckily, the verb goes as “voient” In both cases!