Why is " Portugal is a small country of Europe." not accepted?
Why is this d'Europe?
For some reason 'small' is acceptable, but 'little' is not.
Does DL know some sort of special rule for English that I don't?
No, just someone was in a hurry and did not include it. I have added it.
"...small European country" isn't accepted? :/
Yes it is, if the rest is correct.
Interesting - this has the definite article for the country whereas there is another identical exercise save for its absence. Is this the correct one - or can both be right?
Both can be right since it depends on what comes before the country name.