"What is this?"
The lady reading Що renders it as "shto". Is this totally correct? or is it more correct to pronounce "shcho"? or "shsho"?
That's an error. When Duolingo checks your translation it at first transliterates it to Latin and than back to Cyrillic. Hence, a lot of weird spellings are now, unfortunately, accepted
Accepting some typos isn't the worst, but it's unfortunate that can't let you know it's a typo in such a case.
Maybe Duolingo should represent each Cyrillic letter with unique Latin letter combinations or numbers rather than trying to transliterate? Then it would know exactly how the user spelt a word.
Agreed. If they're not already using unicode, they should. It allows them that freedom. (Although, the encoding might not be the issue.)
I was just trying to make a suggestion that doesn't require Duolingo to change its code base.