This is probably more common than most people think. In fact, this school had a very clear process in place for the spelling bee under which someone could challenge a decision on the part of the organizers about the correct spelling of a word. The parents waited until after the event was over before challenging the result (instead of doing it before the next contestant was given a word -- like they were supposed to), so technically they really were not on solid ground here.
Oh, I understand the technicality. That isn't in question. I just think that when a word is misspelled on the master list and nobody catches it, that it makes the adults who organized and judged the event look extremely foolish.
As for the rules, I agree that the parents should've challenged the error immediately. The fact that they didn't indicates to me that the rules were not clearly understood by all the contestants prior to the contest, which is another problem the organizers apparently have. While ignorance isn't an adequate defense on the part of parents, it would seem to me that the contest organizers were incomplete in their preparation of the material and the preparation of the contestants.
The error and the ignorance of the rules is indicative of a poorly organized event, which reflects poorly on the part of the organizers, and somewhat similarly on the parents. But I'm glad the girl is going to be given a chance to continue in competition. Being a stickler for the rules in a kids event, when the rules perpetuate an injustice rather than trying to be fair to the child would be sending the wrong message to the kids. We don't want kids growing up believing that they should follow the rules off of a cliff. Doing the right thing is more important than following rules, and accepting responsibility for breaking rules in order to do the right thing is just as important.
I'm not a bleeding heart for immigrants, but the idea that a child must depend upon her parents to protect them from unfair treatment at a spelling bee seems a little twisted to me. The organizers of the spelling be have a vested interest in fairness and should adopt rules which protect the children.
Had it been my child, I would not have sued, but I would have ridiculed the organizers relentlessly regarding their poor quality control and irresponsible rules.