it sounds like the original poster is content with the fail given by the counselor after your theraputic posts. I think their issue was with a SM not be encouraging. Who cares how many merit badges the kid has or hasn't. If he wants to earn them. Let him. Merit badges often introduce a scout to something, they don't make them experts in the field. Who's to say what the scout gets out of it. Lifesaving is no merit badge to "fudge" the results with, I agree. I think what they were saying other scouts did the same thing. But once again the scout accepted his failure in the end. Don't we want kids to perserve? Maybe not that day though. Maybe the counselor who ever it was should have taken him aside and let him down and like you have suggested encourage him to take some more lessons. His age shouldn't matter, I've seen some Mannly looking 12 yr. olds!
Let's get real though I doubt the "class" was about teaching as much as it was about testing.
Who knows only one person the original post was there.