Don't spend any time wondering about how to argue the failure. It won't do you any good. The best case is your student takes a ride with the FAA instead of the DPE.
The failure remains on the record because despite the "Designee Handbook" having a statement about contesting a checkride, OKC doesn't have a procedure for dealing with a successful contestment of a checkride. They treat it as a failure and re-take. The failure remains on your record as a CFI and the record of the student.
The failure remains on the record because despite the "Designee Handbook" having a statement about contesting a checkride, OKC doesn't have a procedure for dealing with a successful contestment of a checkride. They treat it as a failure and re-take. The failure remains on your record as a CFI and the record of the student.