"Please cut the bread with a knife."
I answered the same and it was wrong considering the other sentences using this order.
I thought the "で" particle had to do with 'place' (like 'at' or 'in,' etc.)-- why is it suddenly being used exactly like "を"??? And for that matter, wouldn't this whole sentence make way more sense with a は/を combination instead of this bizarre を/で one??
を is the particle used for the thing that the verb is acting upon. In this case, it's the bread. で is the particle that gives context to the verb. Sometimes that context is where, sometimes that context is how.
ともだちをロンドンでみました。- I saw my friend [(in) London].
ことばを日本語でかいた。- I wrote words [(in/using/with) Japanese].
パンをナイフできった。- I cut the bread [(using/with) a knife].