First, remember that having 12 in the huddle is not a foul according to NFHS. Now, if the replaced playing didn't leave the huddle immediately, then yes, you would have a foul.
But, I kind of agree with your philosophy about "buying" his way out of the foul. You could say that you didn't notice him requesting the timeout. Or, if a wing guy saw the request before you flagged him, then I think you made a good decision. On the other hand, if you flagged him then the coach requested the timeout, I would not disregard the flag. I would penalize him and ask if he still wanted the TO.
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