I wouldn't think of it as a numeral, especially as numbers typically go before the noun, rather than after it. ar fad can modify a noun, in which case it usually means "the whole" for a singular noun, or "all" for a plural noun, so an lá ar fad is "the whole day" (or "all day long", to tie in with the "length meaning of fad), an scéal ar fad - "the whole story", na daoine ar fad - "all the people".
When ar fad qualifies an adjective, it's usually an intensifier like "really", "completely" or "totally". iontach ar fad - "really wonderful", sin scéal eile ar fad - "that's a different story entirely", Tá said go haoibhinn ar fad - "they are absolutely gorgeous" etc.
ar fad is an idiom, and the translation isn't always going to be exact, so the NEID for example, translates "the house was completely destroyed" as scriosadh an teach ar fad, whereas I would usually back-translate that as "the whole house was destroyed", but idiomatically, there's very little difference between "the house was completely destroyed" and "the whole house was destroyed" in English. But the ar fad in this exercise is clearly qualifying the noun na páistí, not the verb, so "all the children" is the intended meaning.
The "of" is redundant - it serves no grammatical or syntactic purpose (you need "of" before pronouns eg "all of us", you don't need "of" before nouns eg "all the children"). It's not necessarily wrong, but as it's more common in American English than in Irish or UK usage, it's likely that it never even crossed the minds of the original course creators that anyone would try to say it that way.
Nothing to do with me, mate - I have no control over the acceptable answers. I'm just suggesting an obvious reason why answers with an extraneous "of" might not have been added as acceptable alternative answers. Arguing about it here in the Sentence Discussions won't change that - that's what the "report" flag is for.
(There are people who would argue that "might not of been added" is now synonymous with "might not have been added", but they'd be wrong).