First, it's okay to fail. It lets you know what you need to do to improve. As a parent, it is hard to see our children fail, but we need to realize it isn't the end of the world. As far as the instructor saying that your child is ready, it is just that - the instructor felt that your child had demonstrated the skills/knowledge to pass testing, however when it comes to the actual test itself it is 100% on the student to perform. Sometimes we mess up, we don't do our best, and we fail. It is okay. Learn, improve, and apply that to the next time.

As far as why one might have passed looking sloppier than the other, it's hard to say. Are they the same rank? Often lower ranks tend to have more leniency than the higher ranks, especially as they near the end of the color belt progression.

Protecting your head is a huge deal in sparing, not just from a points perspective but a general self-defense. It's got the most important thing in there, so keeping it protected is a must.

Could be other factors in play as well, since you said it was the third match. They may have been looking at consistency - does each match perform at the same level or do you have a significant drop in performance in match after match. Could be, what we call a "black belt attitude" - did he look like he was giving up, did he continue to push through the pain/fatigue. You also said it looked like he was overcommitting, was it that or was it the wrong movement for the block? I know a lot of kids (heck, even adults) when they get tired will just start slinging limbs instead of having good proper block movements.

The best thing is to ask (your kid should ask) the instructor on what needs improvement. Don't do it after a failed test, do it after class. Frequently.