Translation:They seemed to be happy with their lives.
Duo uses the Spanish word 'aparecer' (to appear,to show up,to turn up) as the translation for 'appear' while 'paracer' (to seem, to look, to appear to be) is translated to seem (in this cased seemed and parecian) In English it would be fine to say "They appeared to be happy with their lives" but "They seemed to be..." is a better translation.
I'm Spanish native Speaker, and Yes... that is an error, It should be "Ellas parecían estar FELICES con sus vidas" because "FELICES" is the conjugation of plural-third person and "FELIZ" is only for singular-third person.
Imagine replace "FELIZ" by other adjective like "GORDO"
It would be an error saying "Ellos solían estar GORDO cada verano" (It's a gramatical errror)
Unless the person that made this exercise were elder than 50 years old...