Illegal Sub or unreported reentry out of order

[collinb]

This was High School Varsity Softball.
In the first inning Team (B) pinch runs for DH with S4 in the 4th position.Then at end of inning reenters original DH.
Then in the 7th S4 suddenly appears in batter's box after first pitch.
Team (A)head coach declares "they are batting out of order.
Team (B)head coach now says she forget to tell me S4 was reentering.
At this point I think I have an unreported reentery. I give coach (B) warning and say let's continue.
Now team (A) shows me that team (B) is in the third position of their batting order and not the fourth where S4 originally substituted. They demand that S4 is illegal substitute. They want an out declared for penalty.
I say no because I think we have an unreported substitute batting out of order. Just bring the correct batter in to start with (ball one).
Team (A) coach asked me to confer with base umpire. Base umpire agrees with head coach that we have an illegal substitute. I then penalise Team (B) with an out and continue on. This did not have anything to do with changing the game because Team (B) won 6-0.
After coming home and going thru case studies I think I was right that S4 was not an illegal sub but just an unreported reentry batting out of order.