MikeE says formal, I might say literary or elevated diction. His example of a Nativity scene, like in a painting in a museum, sounds very good for an art critic or a guidebook. However, it could sound odd for a teenager to use the same language describing a picture in a magazine or a family snapshot. Perhaps part of the difference is that a religious image is meant to convey an eternal, timeless truth; but that's probably not the case for the picture in your students' assignment.
I agree that you shouldn't mark it wrong or make a big deal out of it; that could discourage the kids. If you want to, you could give a few more examples when handing back the tests. The picture is like a moment, so if there is action in it, you use the present progressive because the action is happening right now in your mind as you look at the picture. If there isn't any action, you use 'There is/are': There is a picture on the wall.
But if they don't get it this year, don't worry about it, just move on. It will make sense later after they have read more English. Right now, just give them lots of credit for remembering their vocabulary words and 'He, she, it, das S muss mit.' (-: