Testing out and status
Why, if a student tests out of lessons, will it not show that the lesson is completed on my (or their) assignment status?
Because the assignment you have set is for the students to study those lessons, rather than to test out of them. If you've decided that student doesn't need to do so, you can ignore the fact that it's marked as incomplete. I know that's a bit unsatisfying, but unfortunately Duolingo doesn't yet have a way of manually marking an assignment as complete, or setting / unsetting work by individual student.