Compound characters in word bank often give away the answer.
When constructing Chinese sentences out of the word bank, not only are the compound characters almost always the correct answer, but often there will be situations such as the only verb available being compounded with the new words you are trying to learn, so even if you don't remember the new word, you end up getting the answer right anyway because there was only one possible choice.
When I'm breezing through earlier lessons (for example, trying to get crown levels in early subjects), often I don't even have to look at the answers, because the correct one is usually the compound word.
I personally would prefer if I had to put in each character individually, but a compromise would be to at least break up each individual word into its own word bank choice and not group multiple words together.
Try using the keyboard instead. This removes the word bank. Now you have to think about the words and which order. It may seem difficult, but it reinforces the learning process. I have better word and grammar recollection from keyboard entry than using the word bank. Like you said, using the word bank made it easy to figure out the answer.
I don't like to use the duolingo app for this very reason, instead I always do the Chinese lessons on my PC, entering the answers with my keyboard, there are a lot of tutorials online on how to setup the Chinese IME for a PC, you'll always remember more typing the pinyin. Just selecting the characters you already know have the answer, doesn't help much.
This is an interesting idea. I like the way that it would shift the emphasis on recognizing the character pairings. Most compound words are also used in different cases alone, so recognizing how single characters come together to form bisyllabic words is a good skill to have.
But I think at least in some cases this might lead to a lot of other reasonably valid answers, and thus would require a lot more updating, just as they are starting to get that problem a little more under control. Still, I ultimately think this could be a good way to go...