Agree with accepting any definition it defines, but here they're using it as the common usage of "mauvais". I've rarely heard "mauvais" used to mean evil, especially regarding something like food, and if you want to convey that something is "evil", you'd probably use a stronger word!
There is something wrong with this bread. What did you say? The bread is wrong.
Did you get the right bread this time? Yes, I did. No you didn't. Look at it. The bread is wrong.
It makes sense. It's just a very awkward phrase. Which is why Duo gives you a much better translation to use where there is no context.
Duolingo suggested 'the bread is wrong' as an alternative to ' the bread is bad'. I'm afraid in no context is that correct. Bread cannot possibly be wrong, it is an inanimate object and therefore cannot be right or wrong. I could be 'the wrong bread' as in 'this is not the bread that I ordered', or as you say 'there is something wrong with this bread' (maybe out of date), but it cannot be 'wrong'. I'm afraid in this instance the suggested translation was neither better nor indeed correct. :(
Further to northernguy's suggestions:
The French toast I'm making isn't going to be very good I'm afraid.
The bread is wrong. You have to use a real French baguette to get the right texture of dough, and I used an English bloomer. Plus, it wasn't stale, so it hasn't soaked up enough egg.
They eat some of the French toast.
Yeah you're right - the bread is wrong. Completely wrong.
Apples and oranges. We're talking about an inanimate object, not a concept. It can sort of be "wrong" in that it can be the wrong bread for a particular purpose, but the phrase "the bread is wrong" is clunky. Meanwhile I guarantee you that someone, somewhere, has proclaimed a particular loaf of bread to be the work of Satan. http://coloradoplus.net/wp-content/uploads/2014/01/215307-evilbread-t.jpg