Translation:The town was near but it couldn't be seen.
thanks for stressing this - it had me foxed - have a lingot - DL is great - so very often traditional grammar books aren't overly useful as they don't of course know why you opened the book. Here a puzzled but focused question can, very quickly at times, elicit a focused bit of guidance.
If this is idiomatic Italian, of course I would not argue, but I did not think that "non si vedeva" necessarily implied a lack of ability to see rather than just the act of "not seeing it" i.e. "you didn't see it." So where is the inability to see implied in this construction?
I'm also confused about the "it". To me there is no Italian word for "it" in the sentence - such as "... non lo se vedeva", but to leave it off in the English is not acceptable to Duolingo. Am I right in deducing that, where it is clear what one is speaking about, vedere does not need the "it". Also, does the omission of "it" in the English translation actually make it wrong (rather than just weird), or should I feed that back to Duolingo?
In this construction, it is typically expressing the impersonal "one" person. As in "one can not see it". It is conjugated as third person singular in Italian, and translated as "one" or as "you" in English. As I understand this construction, it is not correct to translate it as "we" because that would be written differently in Italian. (In English, "one" or the ambiguous "you" of recipes and instruction manuals are both impersonal forms, and therefore are valid translations of the Italian "si" form. But "we" is only used in English by royalty and is very presumptuous, so it's rarely used in this way.)
It is to do with the derivation of the word. "Paese" comes from the Latin "pagus" which can means a village/town or the area centred on any settlement, and therefore the land around. The idea of a "country" containing many cities and areas simply did not exist in Italy until fairly recently, so the word that was already used for a smaller area had to be used for bigger ones. The French have the same problem with "pays" which generally means a country (nation), but often is used for a much smaller area that is in some way coherent, often centred on a town - "Pays de Bordeaux" for example. What a French person means by "mon pays" depends on the context.
At the risk of going on a bit, there is a similarity in the way English uses "country" and "county". In early modern English, such as in Shakepeare's plays, the word "country" often means a much smaller area than it does now, such as what we would now call a county, or at least an identifiable area. English has split the meaning of the two words, but at one stage they would have been synonyms. That is because they derive from the area controlled by a count.
In post-Roman Latin "pagus" was used for the land controlled by a count or "comes". So, in mediaeval Europe a "pagus" (pays/paese) was roughly the same as a "county" which then had to be scaled up to do the work of describing a nation. English made the useful distinction between "county" and "country", but we very easily might not have done, and our "county" would have the same ambiguity as "paese"/"pays".
Hope this helps.