The school's interpretation is incorrect. The correct form of what the school is trying to claim would be "When an electric current passes through it, it gives off light energy only." Otherwise, the sentence is ambiguous which makes it improperly constructed, though it obeys the grammatical rules of English. As for the school's bull**** about it being 'scientific Emglish,' scientific writing is supposed to be clearly constructed to avoid ambiguity of meaning. They fail. I wish the blogger had named the school.
Regarding "All of the Above" - while I have seen this exact form of multiple choice previously, "All of the Above" is only supposed to be used when preceded by statements that can be either true or false, but not a combination thereof. The correct construction of the answers would be as follows (if they must use 'all of the above'):
A) D
B) A, B, C
C) All of the above.
D) B, C, and D only.
Which is still confusing and would be better said as:
A) D only.
B) A, B, and C
C) B, C, and D
D) A, B, C, and D.
However, having taken an astronomical number of multiple choice exams over the years, I can anecdotally confirm that the people writing the tests may be very knowledgeable about their subject areas, but they are not very knowledgeable at all about plain writing and test construction. I've taken a few MC exams where the real test was not the subject material, but interpreting the damned questions.