Agreed, in this case. I would use it for the imperative, which in this sentence it doesn't look like "sagen" is. But I haven't learned the imperative mood so far so I wouldn't know what the imperative form for "sagen" would be. Or even if it is in the imperative form, I don't know if Duo would be giving examples of the imperative form given that I haven't done a lesson on it yet.
You can't always just do a word-by-word translation. "Alle" is plural in German, but "everyone" is singular in English. In other words, we don't say "everyone say"; we say "everyone says." So correct is "Everyone says bye."
Using "say" turns the sentence into a command, which the German sentence is not.
"All say farewell." rejected.
"All say; 'bye.'" rejected.
"Says everyone; 'bye.'" rejected.
"Everyone's saying; 'chow.'" rejected.
"Everyone's saying; 'bye.'" rejected.
"Everyone's saying; 'toodles.'" rejected.
"Everybody's saying; 'bye.'" rejected.
"Everybody is saying solong." accepted.
We don't usually use just "all" as a subject like that; "everyone/everybody" is much better.
"Says everyone; 'bye'" is the wrong word order; you need "Everyone says, bye."
"Ciao" (which you've misspelled) and "toodles" are all relatively obscure colloquialisms, so it's not surprising that Duo doesn't accept them. I'm not sure that "farewell" is accepted either, since it's not too common in today's usage.
In addition, your punctuation isn't really right. You should have a comma rather than a semicolon, and you've added quotation marks that the German sentence doesn't have. (The quotation marks aren't really wrong per se, but you should match what the German sentence did here.)
"Everyone's saying, bye" would be just fine (and is probably accepted), so most likely it was your punctuation that threw Duo off on that one.
I don't know how long ago you went to school but they revised the rules for when to use ss and when to use ß in 1996. Here is an extract from the Wikipedia article :
"In the orthography of the German spelling reform of 1996, both ß and ss are used to represent /s/ between two vowels as follows:
ß is used after diphthongs (beißen [ˈbaɪ̯sn̩] ‘to bite’)
ß is used after long vowels (grüßen [ˈɡʁyːsn̩] ‘to greet’)
ss is used after short vowels (küssen [ˈkʏsn̩] ‘to kiss’)"