Translation:Normally, I do it on vacation.
I'm guessing because the French sentence would more typically be about something doing something on vacation than making something. And I think it would probably be something like "j'en fait" rather than "je fais ça" if something was being made.
But I think you're right that it would be possible. So it was probably rejected more because it was uncommon and it hasn't learned it yet than because it was wrong, at my best guess.
Report it. "Timber-maniac" is right about the limited options with Duo, but in the same way, as sentences becomes slightly more involved, a proper translation must be sought which expresses the sentence in correct English. Otherwise, French speakers who use this method to learn English will learn awkward structures.
We're way beyond "make" and "do" now. Check this out: http://www.larousse.com/en/dictionaries/french-english/faire/32616
I think it would have to do with the nature of the statement. You're talking about what you do on your vacation. The sense of it is something that you do habitually, i.e., every time you go on vacation. You did that last year; you will do it again this year, but you are not "doing" it now. So the present continuous tense really doesn't fit.
"vacances" should also be accepted as plural. See the following where "holidays" is included as a plural for British English, and "holidays" is certainly the equivalent of "vacations" in Australia. https://www.collinsdictionary.com/dictionary/french-english/vacance