"Aquel niño lee un libro."
Would it be correct to say, "That boy over there reads a book" to distinguish it from "Ese . . . "?
and yet I was just marked wrong. Aquel means over there. It should be right :/
I was marked wrong for "that boy over there . . . ". I read the explanation, and it says that aquel is "closer to" that over there, so I am not sure. Maybe since English doesn't have a different word for that and that over there, just to be safe, just say that?
I have discovered from further reading that that would be "està leyendo".
When do you use the accented form of the word and when do you not? Something about ambiguity right?
Yes, that's right, however, just to keep it interesting, the rules have been changed since 2010. No use of the accent, even in cases of ambiguity. Here is a discussion: http://spanish.stackexchange.com/questions/31/what-is-the-difference-between-aquel-and-aquel