I love it when my students outsmart my questions like this, honestly shows good intelligence and problem solving. Also encourages me to write my questions/prompts with more precision.
idk the whole idea of a test is to demonstrate understanding, which this doesn't. i feel like a good teacher wouldnt take off points, but would have to pull the student aside and be like "ok now circle the tens place, hundreds place, etc"
Exam questions should be designed so that answers (that follow any instructions) demonstrate understanding. If they are not, that's the exam's fault, not the student's, and so should have no impact on the grade.
In this case, the exam could verify understanding by either asking additional questions (in the number 123, what digit is in the tens place), and/or by modifying the existing questions to require circling the correct place or not using the specified number outside that place. But regardless, if an answer is correct, then it is correct.
I'd agree that it's perfectly fine for a teacher to follow up with the student to make sure they know what they were expected to know. But they should not make the exam score itself dependent on the follow up.
The exam is over, the questions and answers were what they were, the student should not have to worry that they will have to continually resit exams as teachers decide that they didn't like the questions that they asked.
A good teacher would blame the tools not the student.
It's a primary school kid, they absolutely do not have the age to "take the responsible route based on the intents of the exercise". The only adult in the room should act like one and give the student the full grade.